SEBI Checklist of buyback of shares

SEBI Checklist of buyback of shares

Recently, many companies increased their equity value by availing of the buyback of shares. So, this article will help you in having a checklist before you go for the buyback.

Provision related to buyback

1. Companies Act 2013

1. Section 2 (64)

2. Section 68, 69, 70

3. Rule 17 – The Companies (Share Capital and Debenture) Rules 2014

4. SEBI (Buy-Back of Securities) Regulations, 2018

SEBI – Check the below list

• The buyback shall be 25% or less of the aggregate of paid up capital + free reserves of the company. (based on both standalone and consolidated financial statements of the company
• The ratio of aggregate of secured and unsecured debts owed by the company to the paid up capital and free reserves after buy-back shall
• Be less than or equal to 2:1 based on the standalone and consolidated financial statements (if CA 13 has higher ratio, that will prevail)
• All shares or other specified securities for buyback shall be fully paid up
• A Company
  • shall not buy back its shares or other specified securities so as to delist its shares or other specified from the stock exchange
  • shall not buyback its shares or other specified securities from any person through negotiated deals, whether on or off the stock exchange – through spot transactions or through any private arrangement
  • shall not make any offer of buyback within a period of one year reckoned from the date of expiry of buyback period of preceding offer of buyback period of the preceding offer of buyback, if any
  • shall not allow buyback of its shares unless the consequent reduction of its share capital if effected
  • no such buyback shall be made out of the proceeds of an earlier issue of the same kind of shares or same kind of other specified securities.
  • No company shall directly or indirectly purchase its own shares or other specified securities
  • Shall not withdraw the offer to buy back after the draft letter of offer is filed with the Board or public announcement of the offer to buyback is made
  • Shall not raise further capital for a period of one year from the expiry of buyback period, except in discharge of its subsisting obligations
  • No public announcement of buy-back shall be made during the pendency of any scheme of amalgamation or compromise or arrangement pursuant to the provision of the Companies Act.
  • Shall not issue any shares or other specified securities including by way of bonus till the date of expiry of the buyback period for the offer made under these regulations

• A Company shall check buyback
  • Is authorized by the company’s article
  • A special resolution has been passed at a general meeting of the company authorizing the more than 10% buyback
  • Completed within a period of one year from the date of passing of the resolution
  • After expiry of buyback, file with the ROC and the Board, as specified in the Rules
  • The explanatory statements for the member’s resolutions under section 102 of the Companies Act 2013
  • No insider shall deal in shares or other specified securities of the company on the basis of unpublished price-sensitive information relating to the buyback of shares or other specified securities of the company
  • Shall pay the consideration only by way of cash.

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