The Securities and Exchange Board of India (SEBI) defined small shareholders, for the purpose of buy back of shares by companies, as one who hold shares whose market value, on the basis of closing price of shares as on record date, is not more than Rs.2 lakh.
It has also been decided to reserve 15 per cent of the number of securities which the company proposes to buy back or number of securities entitled as per their shareholding, whichever is higher, for small shareholders.
These amendments in SEBI (Buy-Back of Securities) Regulations, 1998, have been announced through an official Gazette notification on Tuesday, which would be known as SEBI (Buy-Back of Securities) (Amendment) Regulations, 2012.
The SEBI stipulated that a company making a buyback offer should announce a record date for determining the entitlement and the names of the security holders, who are eligible to participate in the proposed buyback offer.
The letter of offer along with the tender form would be despatched to the shareholders who are eligible to participate in the buy-back offer and the date of opening of the offer would be not later than five working days from the date of despatch of letter of offer.
The offer for buy-back would remain open for ten working days.
The market regulator also said that the shares proposed to be bought back would be divided into two categories: reserved category for small shareholders; and the general category for other shareholders and the entitlement of a shareholder in each category would be calculated accordingly.
The company, which plans to buy back its shares, has to make a public announcement within two working days from the date of resolution adopted by the board of directors in at least one English national daily, one Hindi national daily and a regional language daily, all with wide circulation, at the place where the registered office of the company is located.
