Capital markets regulator SEBI (Securities and Exchange Board of India) has put restrictions on companies for placements of bids, price, and volume via the stock exchange route. A SEBI circular said the restrictions have been set out for the companies undertaking buy-back through the stock exchange route. At present, companies have the provision of both the stock exchange and tender offer for the share buyback. 

SEBI said the company will not "purchase more than 25% of the average daily trading volume (in value) of its shares or other specified securities in the ten trading days preceding the day in which such purchases are made."

The regulator said companies will also not place bids in the pre-open market, first thirty minutes and the last thirty minutes of the regular trading session. The company’s purchase order price should be within the range of ±1% from the last traded price.

Regarding the margin requirement for deposits in an escrow account, the SEBI said the escrow account will consist of cash and/or other than cash. “The portion of an escrow account in the form of other than the cash shall be subject to an appropriate haircut, in accordance with the SEBI Master Circular for Stock Exchange and Clearing Corporations dated July 05, 2021, as amended from time to time,” SEBI said. 

SEBI has advised merchant bankers to buy-back offers to ensure the adequate amount after the applicable haircut is available in an escrow account till the completion of all formalities of buy-back.

It has directed the Bombay Stock Exchange and National Stock Exchange to bring the provisions of this circular to the notice of all listed entities and also disseminate the same on their websites. 

In February, SEBI amended the buyback of securities rules for ease of doing business and to make the process of buyback easier. The amended buyback rules would come into effect from March 9. 

"The company making the buy-back offer shall disclose the maximum buy-back price, being the upper end of the price range, as approved by the Board of Directors of the company or its shareholders, as the case may be and the book value of the shares or other specified securities of the company," SEBI had said. “The buy-back price shall depend upon the price discovered through the bids received from the shareholders within the price range," it added.  

To strengthen corporate governance, it has also proposed tightening regulations for the issuance of bonus shares by a listed company. It released a consultation paper regarding the changes that can be incorporated into the issue of capital and disclosure requirements (ICDR) to increase transparency among the listed entities. 

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