The SEBI guidelines for buyback policy

1.(a) These regulations shall be called the Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998.

(b) These regulations shall come into force on the date of their publication in the Official Gazette.

Definitions

2(1) In these regulations, unless the context otherwise requires:-

(a) ‘Act’ means the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(b) ‘associate’ includes a person,

(i) who directly or indirectly by himself or in combination with relatives, exercises control over the company or,

(ii) whose employee, officer or director is also a director, officer or employee of another company;

(c) ‘Board’ means the Board as defined in clause (a) of sub-section (1) of section 2 of the Act;

(d)‘control’ shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders or voting agreements or in any other manner;

(e)‘company’ includes a company registered under the Companies Act, 1956 ( 1 of 1956 ) and buys or intends to buy its own shares in accordance with these regulations;

(f) ‘Companies Act’ means ‘Companies Act, 1956 (1 of 1956) as inserted by Companies ( Amendment ) Ordinance, 1998 ( 19 of 1998 );

(g) ‘insider’ means an insider as defined in clause (e) of regulation 2 of Securities and Exchange Board of India (Insider Trading) Regulations, 1992;

(h) ‘merchant banker’ means a merchant banker registered under section 12 of the Act;

(i) ‘Ordinance’ means the Companies (Amendment) Ordinance, 1998 ( 19 of 1998);

(j) ‘promoter’ means ‘promoter’ as defined in clause (h) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Substantial acquisition of shares and Takeovers) Regulations, 1997;

(k) ‘registrar’ means a registrar to an issue and includes a share transfer agent registered under section 12 of the Act;

(l) ‘securities’ means ‘securities’ as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(m) ‘statutory auditor’ means an auditor appointed by a company under section 224 of the Companies Act 1956 (1 of 1956);

(n) ‘stock exchange’ means a stock exchange which has been granted recognition under section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(o) ‘tender offer’ means an offer by a company to buy back its shares through a letter of offer from the holders of the shares of the company.

2. All other expressions unless defined herein shall have the same meaning as have been assigned to them under the Act or the Securities Contracts (Regulation) Act, 1956 or the Companies Act, 1956, or any statutory modification or re-enactment thereof, as the case may be.

Applicability

3. These regulations shall be applicable to buy-back of equity shares of a company listed on a stock exchange.

Company may buy back its own shares

4 (1) A company may buy-back its shares by any one of the following methods; -

(a) from the existing shareholders on a proportionate basis through the tender offer;

(b) from open market through

(i) book-building process,

(ii)stock exchange,

(c) from odd-lot holders.

(2) A company shall not buy back its shares from any person through negotiated deals, whether on or of the stock exchange or through spot transactions or through any private arrangement.

(3) Any person or an insider shall not deal in securities of the company on the basis of unpublished information relating to buy-back of shares of the company.

Special Resolution

5(1) For the purposes of passing a special resolution under sub-section (2) of section 77A of the Companies Act, the explanatory statement to be annexed to the notice for the general meeting pursuant to section 173 of the Companies Act shall contain disclosures as specified in schedule I.