[Shaswat Kashyap and Harshal Chhabra are students at Gujarat National Law University] The buyback of shares involves a company repurchasing its shares and other specified securities issued by the company. This approach has consistently been a favoured means for Indian companies to distribute accumulated profits among their shareholders. Buybacks are also considered to be more tax-efficient when...
Capital Reduction: Tax Conundrums
[Sumit Bansal (Partner), Shivani Chhabra (Associate) and Taranjeet Singh (Associate) are with S&R Associates, Advocates] Capital reduction refers to the technique of reducing a company’s share capital in any form. It is a mechanism usually adopted by companies for re-modelling their capital structure, amongst other means (viz., buy-back of shares and redemption of preference share capital)...
Buyback during COVID – 19: A Solution to Salvage Stock Prices?
[Aditya Bhayal and Prachi Tripathi are 4th year B.A.LLB (Hons.) students at NALSAR University of Law, Hyderabad] Amidst the growing uncertainties surrounding the COVID-19 pandemic, the stock markets across the world have taken a beating in the past couple of months. Both of India’s benchmark indices, NIFTY and SENSEX, have registered lowest drops in over four years, as the market has slowly...
SEBI’s Proposed Buyback Rules for Leverage Limits
[Pammy Jaiswal is a Partner at Vinod Kothari and Company, and can be reached at [email protected]] The Securities and Exchange Board of India (SEBI) has issued a discussion paper on 22 May 2019 on proposed changes to the conditions relating to a buyback. While one of the proposed changes in terms of computing the buy-back size is logical, the other change on taking the debt to equity...
Buyback during Pendency of Amalgamation: SEBI Order in the Wipro Case
The SEBI (Buy-back of Securities) Regulations, 2018 states in regulation 24(ii) that a company shall not announce a buy-back when a scheme of amalgamation or compromise or arrangement pursuant to the provisions of the Companies Act, 2013 is pending. Such a proscription against buy-back operates because a scheme of amalgamation is a material transaction and could potentially alter the fundamental...
Premium on Buyback: a Deductible Expenditure?
In an earlier post on this blog, Mr. Jayant Thakur had considered certain decisions of the Income Tax Appellate Tribunal (notably, Chemosyn v. ACIT) where the ITAT had held that “… premium paid by the company on buyback of shares of a warring shareholder group is deductible as business expenditure in the hands of the company…” It was pointed out in that post that the Tribunal had...
SEBI Amends Delisting, Takeovers and Buyback Regulations
[The following post is contributed by Yogesh Chande, who is an Associate Partner with Economic Laws Practice, Advocates & Solicitors. Views of the author are personal. SEBI has with effect from 24 March 2015 amended the following regulations: (a) SEBI (Delisting of Equity Shares) Regulations, 2009 (“Delisting Regulations”); (b) SEBI (Substantial Acquisition of Shares...
Proposed modifications to buyback provisions
SEBI has just placed a discussion paper on its website entitled “Proposed modifications to the existing framework for buy back through open market purchase” for public comments. Comments on the discussion paper have been solicited on or before January 31, 2013. Upon a review of the current regulations and studying the market dynamics, the key recommendations of the discussion paper are set out...
Buybacks and open offer – recent decision of SAT
Recently, on 21st November 2011, the Securities Appellate Tribunal (SAT) held that the increase in percentage holding of a person consequent to buyback of shares does not amount to acquisition and thus cannot result in an open offer. This is, in my view, a correct legal interpretation of the law (as also argued by me in an earlier post here). But SEBI had, in practice, taken a view that such...
Buyback and Takeover Regulations – Yet another development
See my earlier post on a recent decision of SEBI on whether increase in percentage holding consequent to buyback of shares would amount to “acquisition” under the Takeover Regulations. If that and earlier posts are reviewed, one would note that SEBI has taken a fairly consistent stand that such increase does amount to acquisition. Now, in a recent order granting exemption under the...
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