SEBI proposes stricter rules for open-market buybacks

SEBI has proposed additional safeguards and a 66-working-day completion timeline for open-market buybacks through stock exchanges. The regulator also suggested measures to protect minority shareholders, align buyback rules with the Companies Act, and improve communication with shareholders

Mumbai: The Securities and Exchange Board of India (SEBI) has proposed additional measures to its plan to reintroduce open‑market buybacks through stock exchanges, including a shortened completion timeline and new safeguards for minority shareholders.

SEBI, after consultation with the Primary Market Advisory Committee (PMAC), said companies would be allowed to undertake open‑market buybacks which must be completed within 66 working days from the offer opening, and must use at least 40 per cent of the buyback size within the first half of the offer period.

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The regulator said a 66-day timeline is warranted due to recent changes under the Finance Act, 2026 to the Companies Act, with respect to the permissible gap between two buyback offers, which necessitates a balanced approach.

The regulator said that a six-month-long period proposed by PMAC may make buybacks irrelevant in the context of market developments and could prove difficult for shareholders to track.

As an additional safeguard, SEBI may direct freezing of shares and other specified securities held by promoters and their associates at the ISIN level during the buyback period. Existing rules bar promoters from dealing or transferring company shares from the board decision until the buyback closes.

The regulator has proposed removing the requirement for a separate trading window for buyback transactions and conducting such trades through the normal market mechanism.

Further, it proposed dispensing with the requirement to display the company’s identity as a purchaser on the trading screen.

The regulator also proposed introducing an explicit provision to ensure buybacks do not breach minimum public shareholding norms and aligning the interval between two buyback offers with provisions under the Companies Act, 2013.

It also mulls making companies mandatorily send an intimation to shareholders through electronic mode regarding the buyback offer within one working day of such public announcement.