Share Buyback Rules, important news for share market investors, share buyback rule changed, know – sebi brings tighter rules for share buybacks imposes new restrictions check

New Delhi: New share buyback rules for companies have come into effect from today, Thursday. Markets regulator Securities and Exchange Board of India (SEBI) on Wednesday imposed restrictions on bid, price and quantity for companies doing share buybacks through stock exchanges. According to the new restrictions, a company cannot buy more than 25% of the average daily trading volume (by value) of its shares during the 10 trading days preceding the day on which the shares are bought, Sebi said in a circular.

Further, the Company will not be able to place bids in the pre-open market, during the first 30 minutes and the last 30 minutes of the regular trading session. Also the order price of the company should be within 1% on either side of the last traded price. Meanwhile, SEBI has ordered the companies and brokers to follow these rules and has given responsibility to the stock exchanges to see if the above rules are being followed or not. Anyone found violating these rules will face fines and other action.

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Currently, companies have two options for buying shares, stock exchange and tender offer. The new share buyback rules for companies have come into effect today i.e. from 9th March 2023.

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The rules changed in February
Note that Sebi had in February revised the share buyback rules to streamline the share buyback process, provide a level playing field to investors and promote ease of doing business. According to these rules, share buyback of companies through stock exchanges will be phased out.

• This will eliminate loopholes in the existing process.
• In addition, 75% of the buyback proceeds will have to be used by way of stock exchange, as against 50% earlier.
• Buybacks will be done through a separate window of stock exchanges unless they are permitted by the exchanges.