sebi - buy back

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    SECURITIES EXCHANGESECURITIES EXCHANGE

    BOARD OF INDIABOARD OF INDIA

    (Buy Back Of Securities)(Buy Back Of Securities)

    REGULATIONS, 1998REGULATIONS, 1998

    Dr J P JoshipuraDr J P JoshipuraDirector, SLIMSDirector, SLIMS

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    Conditions Of BuyConditions Of Buy--Back and GeneralBack and General

    Obligations Of CompanyObligations Of Companya)a) A company can buy back its shares or other specified securities only byA company can buy back its shares or other specified securities only by

    any of the following methods:any of the following methods:

    i.i. From existing share/security holders on a proportionate basis throughFrom existing share/security holders on a proportionate basis through

    tender offer.tender offer.

    ii.ii. From open market through:From open market through:

    Book building processBook building process

    Stock ExchangeStock Exchange

    iii.iii. From odd lot sharesFrom odd lot shares

    b)b) A company cannot buy back its shares or other specified securities inA company cannot buy back its shares or other specified securities in

    such a manner that it would be required to delist.such a manner that it would be required to delist.

    c)c) Consideration for buy back has to be paid in cash only.Consideration for buy back has to be paid in cash only.

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    Conditions and General Obligations Conditions and General Obligations

    d)d) A company cannot withdraw the offer to buy back after the draft letter ofA company cannot withdraw the offer to buy back after the draft letter of

    offer has been filed with SEBI or public announcement of the offer to buyoffer has been filed with SEBI or public announcement of the offer to buy

    back has been made.back has been made.

    e)e) A company cannot issue any shares or other specified securities includingA company cannot issue any shares or other specified securities including

    by way of bonus shares till the date of the closure of the offer.by way of bonus shares till the date of the closure of the offer.

    f)f) The promoters or their associates cannot deal in the shares or otherThe promoters or their associates cannot deal in the shares or other

    specified securities of the company in the stock exchange during thespecified securities of the company in the stock exchange during theperiod the buy back offer is open.period the buy back offer is open.

    g)g) No public announcement of a buy back can be made duriing the pendencyNo public announcement of a buy back can be made duriing the pendency

    of any scheme of amalgamation or arrangement or compromise.of any scheme of amalgamation or arrangement or compromise.

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    Conditions and General Obligations Conditions and General Obligations

    h)h) A company intending to buy back its shares or other specified securitiesA company intending to buy back its shares or other specified securities

    has to appoint a compliance officer and investor service centre.has to appoint a compliance officer and investor service centre.

    i)i)

    Details of shares bought back and extinguished and destroyed have to beDetails of shares bought back and extinguished and destroyed have to beinformed to the concerned stock exchange/(s) within 7 days of theinformed to the concerned stock exchange/(s) within 7 days of the

    extinguishment and destruction.extinguishment and destruction.

    j)j) A company cannot buy back securities lockedA company cannot buy back securities locked--in securities during thein securities during the

    locklock--in period.in period.

    k)k) Within two days of the completion of a buy back, the company has toWithin two days of the completion of a buy back, the company has to

    issue a public announcement giving certain details and in a prescribedissue a public announcement giving certain details and in a prescribed

    manner.manner.

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    Requirements Of The Special and BoardRequirements Of The Special and Board

    ResolutionResolution Section 77A (2) (b) stipulates that a company needs to pass a specialSection 77A (2) (b) stipulates that a company needs to pass a special

    resolution in the general meeting regarding its buyresolution in the general meeting regarding its buy--back.back.

    The SEBI buyThe SEBI buy--back regulations specify certain matters in relation toback regulations specify certain matters in relation topassing of these resolutions. They are:passing of these resolutions. They are:

    a)a) In case, where a special resolution is passed in the general meeting, theIn case, where a special resolution is passed in the general meeting, the

    explanatory statement to the notice of general meeting should containexplanatory statement to the notice of general meeting should contain

    information as per schedule I of the regulations.information as per schedule I of the regulations.

    b)b) A copy of the special resolutions passed should be filed with SEBI and theA copy of the special resolutions passed should be filed with SEBI and the

    relevant stock exchange/(s) within 7 days of the passing.relevant stock exchange/(s) within 7 days of the passing.

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    Requirements Of The ResolutionRequirements Of The Resolution

    c)c) With regard to the buy back made under the board resolution, apart fromWith regard to the buy back made under the board resolution, apart from

    the company being required to file a copy of the board resolution with thethe company being required to file a copy of the board resolution with the

    SEBI and the relevant stock exchange/(s) within two days.SEBI and the relevant stock exchange/(s) within two days.

    d)d) It is also required to give a public notice in at least one English nationalIt is also required to give a public notice in at least one English national

    daily, one Hindi national daily and one regional daily within 2 days ofdaily, one Hindi national daily and one regional daily within 2 days of

    passing of the resolution.passing of the resolution.

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    Procedure & Time Frame of BuyProcedure & Time Frame of Buy--back through tender offerback through tender offer

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    Procedure & Time Frame of BuyProcedure & Time Frame of Buy--back through bookback through book

    building routebuilding route

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    Escrow AccountEscrow Account

    i.i. An escrow account is required to be opened on or before the opening ofAn escrow account is required to be opened on or before the opening ofthe open offer.the open offer.

    ii.ii. In case, the total consideration payable under buy back does not exceedIn case, the total consideration payable under buy back does not exceedRs.100 crore, the amount to be deposited in the escrow account shall beRs.100 crore, the amount to be deposited in the escrow account shall be25% of the consideration payable.25% of the consideration payable.

    iii.iii. If the consideration payable is in exceess of Rs.100 crore, the amountIf the consideration payable is in exceess of Rs.100 crore, the amount

    would be 25% of the first Rs.100 crore and 10% of the excess over Rs.100would be 25% of the first Rs.100 crore and 10% of the excess over Rs.100crore.crore.

    iv.iv. The deposit in the escrow account can be in the form of cash depositedThe deposit in the escrow account can be in the form of cash depositedwith a scheduled commercial bank or bank guarantee in favour of thewith a scheduled commercial bank or bank guarantee in favour of the

    merchant banker or a combination thereof.merchant banker or a combination thereof.

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    Escrow AccountEscrow Account

    iv.iv. A minimum of 1% of the total consideration payable must be in the formA minimum of 1% of the total consideration payable must be in the formof cash deposited with the commercial scheduled commercial bank.of cash deposited with the commercial scheduled commercial bank.

    iv.iv. So far as the cash deposited with a commercial bank is concerned, uponSo far as the cash deposited with a commercial bank is concerned, upon

    closure of the tender offer, 90% thereof can be utilized by transfer to theclosure of the tender offer, 90% thereof can be utilized by transfer to thespecial account to be opened for payment of consideration to the securityspecial account to be opened for payment of consideration to the securityholders.holders.

    v.v. The regulation further requires the company to immediately fund theThe regulation further requires the company to immediately fund the

    balance amount to make up the entire amount due.balance amount to make up the entire amount due.

    vi.vi. Bank guarantees and securities deposited in the escrow account, however,Bank guarantees and securities deposited in the escrow account, however,can be returned to the company only after the payment of considerationcan be returned to the company only after the payment of considerationhas been fully made and all formalities relating to the tender offer havehas been fully made and all formalities relating to the tender offer have

    been fully completed.been fully completed.

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    BuyBuy--back throughback through

    stock exchangestock exchange -- provisionsprovisions The resolution passed by general bodyThe resolution passed by general body

    Appointment of merchant bankerAppointment of merchant banker

    Public announcement at least 7 days before commencementPublic announcement at least 7 days before commencement

    of purchase from stock marketof purchase from stock market

    Disclosure of the names of the stock exchange and brokersDisclosure of the names of the stock exchange and brokers

    BuyBuy--back only through nationwide exchanges and throughback only through nationwide exchanges and through

    normal order matching mechanismnormal order matching mechanism

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    ContdContd

    Identity of the company must appear on the electronic screenIdentity of the company must appear on the electronic screen

    as purchaseras purchaser

    Submission of information regarding shares or otherSubmission of information regarding shares or othersecurities boughtsecurities bought

    Verification of the securities bought within 15 days of the payVerification of the securities bought within 15 days of the pay

    outout

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    Buy back through book buildingBuy back through book building--

    provisionsprovisions Resolution passed by general body or specification ofResolution passed by general body or specification of

    maximum pricemaximum price

    Appointment of merchant bankerAppointment of merchant banker

    Public announcement at least 7 days before commencementPublic announcement at least 7 days before commencement

    of buyof buy--backback

    Public announcement regarding the book building process,Public announcement regarding the book building process,

    the manner of acceptance, and the format of acceptancethe manner of acceptance, and the format of acceptance

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    ContdContd

    Book building process only through electronically linkedBook building process only through electronically linked

    transparent facilitytransparent facility

    Number of biddingNumber of bidding centrescentres shall not be less than 30shall not be less than 30

    The offer has to remain openThe offer has to remain open

    for minimum 15 daysfor minimum 15 days

    maximum 30 daysmaximum 30 days

    The final buy back price to be paid to all the shareholdersThe final buy back price to be paid to all the shareholders

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    Obligation of the merchantObligation of the merchant

    bankerbanker

    Ensuring that the company is financially capable to carry out theEnsuring that the company is financially capable to carry out the

    buy backbuy back

    Ensuring adequacy of the escrow accountEnsuring adequacy of the escrow account

    Ensuring that contents of public announcement are true and fairEnsuring that contents of public announcement are true and fair

    Ensuring compliance with SEBI regulationsEnsuring compliance with SEBI regulations

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    THANK YOUTHANK YOU