Sebi reserves 15% for small investors in share buybacks

Reservation applicable to buybacks through the tender route

The Securities and Exchange Board of India (Sebi) on Tuesday introduced a 15 per cent reservation for small shareholders in buyback offers. The securities market regulator has defined ‘small shareholders’ as those whose value of shares in a particular scrip is less than than Rs 2 lakh.

The reservation will apply to share buybacks through the tender offer route. In the next phase, Sebi plans to revise the buyback process through the open market route, through which almost all buybacks take place currently.

Under the new regulations, share buybacks will be conducted through the general and small shareholder categories.

“Fifteen per cent of the number of securities the company proposes to buy back or the number of securities entitled as per their shareholding, whichever is higher, shall be reserved for small shareholders,” said the Sebi notification.

Further, the regulator has reduced the buyback period from 15-30 days to just 10 working days. It has also reduced the time for filing disclosures after the public announcement from seven to five working days.

A company proposing to conduct a buyback will now have to set a record date for determining eligible shareholders.

The new regulations shall be called the Sebi (Buy-Back of Securities) (Amendment) Regulations, 2012.