SEBI Consultation Paper to revamp the share buyback process
The SBI has floated a consultation paper proposing to revamp the share buyback process. The new framework proposes to cut the time period taken for completion of buybacks, enhance the amount companies can repurchase vis-à-vis their free reserves and reduce the cooling-off period between two buybacks.
Currently, companies can buyback only 25 percent of the paid-up capital and free reserves under the tender route. SEBI has proposed an increase in it to 40 percent. The move will help companies return a greater amount to shareholders in the form of buyback. Further, the committee has suggested that companies should be allowed to undertake two buybacks during a 12-month period as opposed to just one at present. Moreover, it has been proposed to reduce the time period of buyback, from the current six months, to 66 working days from April 2023. The SEBI has also prescribed increasing the minimum threshold for buybacks through the open market route to 75 percent from the current 50 percent. This is the threshold that companies have to mandatorily utilise from the amount earmarked for buy-back.
Further, in post-buyback compliance, the company shall extinguish and physically destroy the securities certificates so bought back in the presence of the company’s secretarial auditor within fifteen working days. It is also proposed that incidence of tax on buyback should be shift from the company to the shareholders.
