According to SEBI sources, the regulator, which is currently drafting the buyback guidelines, will look into Bhave's suggestions.

Bhave, sources said, has highlighted that the process of buyback would be extremely transparent for companies as also the regulator, if it is carried out in dematerialised form.

The company and its registrar will not have to handle huge volumes of paper, and this would eliminate loss of shares when sent by investors for buyback.

Given the procedures for dematerialisation, the share will be verified before it is dematerialised, and if the buyback pertains to only dematerialised shares, then a company can be assured of having received no tainted shares.

It will also be simpler to reckon the date for commencement or completion of the buyback as specified by theguidelines.

Bhave has underscored that in the dematerialised form, the process of extinguishing the shares will be transparent and would leave a comprehensive audit trail.

This is because the account that would be opened for the purpose of buyback could be monitored against any misuse. "He has also highlighted that in the event of a company being forced to accept the shares on a proportionate basis, it would be able to accept all the shares without going through the hassles of splitting the share certificate and re-issuing it. This problem would not be there for dematerialised shares," said a SEBI source.

Bhave is learnt to have pointed out that limitations for a buyback only through the depository are that investors wanting to avail themselves of the offer would need to open a depository account. Companies, too, will need to sign up with the depository, if they wish to buy back only in the dematerialised form, and to ensure that it gets only dematerialised shares, the company will need to buy theshares only from the paperless segment of the stock market.

Bhave has recommended that companies which have signed up with the depository should be asked to buy back shares only in the dematerialised form. The shares which are under a lock-in for any reason should not be allowed to be bought back, and companies intending to buy back shares in the paperless form should buy in the dematerialised segment only.

On the procedural front, Bhave has suggested there should be one "buyback" account in the depository and that the title of the account should indicate that the account pertains to buy back.

The shares from the buyback account could be extinguished through the depository, Bhave has pointed out.

Experts including Bhave and SEBI legal executive director, Dharmishta Raval had earlier told The Financial Express that buyback in the dematerialised form would lead to an effective audit trail. It will make the process more transparent.