Stock market regulator SEBI has brought out a discussion paper proposing modifications to the share buyback framework. SEBI observed that buyback of shares through the open market route had failed to achieve its purpose.
It is proposed to mandate 50 per cent as the minimum quantity for the buyback and the process is to be completed in three months.
To ensure that only serious companies launch the buy-back programme, SEBI wants to make it mandatory that 25 per cent of the maximum buyback amount be put in an escrow account.
It also plans not to allow listed companies coming out with buyback programmes to raise further capital for two years.
To prevent companies from launching buyback programmes to stabilise their share price, SEBI said companies that are unable to buy back 100 per cent of the proposed amount (or the proposed maximum number of shares) may not be allowed to come out with another buyback for at least a year.
Another proposal is to restrict promoters dealing in the securities of the company in off-market mode.
The regulator has invited suggestions to its proposals before January 31.
The paper has been brought out after observing that many companies did not buy back even a single share though their window was open for one year.
SEBI also observed that the existing regulation is silent on price, quantity, periodicity and how the company management would exercise its discretion with regard to the buyback.