In another major development, Sebi has decided that all buyback offers which are made through an offer process outside the stock exchange route would involve the appointment of a merchant banker for managing the issue as well as setting up of an escrow account. The group has also decided to identify the various lacunae that exist in the ordinance. Once these have been identified, they would be taken up with the centre.

The group, which had a marathon meeting here on Saturday, has also decided to make it mandatory for a company to suggest a price at which it plans to make the offer for buyback and seek approval from theshareholders for the price. The company would, at the time of seeking the approval of shareholders at the extraordinary general meeting, justify a certain price and only if the shareholders approve of this price would the buyback go through at this price.

The group has also decided not to allow buyback of shares through the negotiated deal route. In addition to this, promoters would not be able to tender their shares through the stock exchanges. This is being done to prevent the promoter from enjoying an unfair advantage.

The promoter would also be required to declare upfront his intent to sell his holding to the company and the exact amount of shares that would be tendered, so as to leave no room for manipulation. A senior Sebi official said that although the implications of buyback on the takeover code would be looked into in detail by the Bhagwati panel, the regulator feels that at this point of time buyback should be exempted from the takeover provisions, ie, if the stake of a promoter goes uppost-buyback, it should not attract the takeover code. Only those stock exchanges which have on-line trading would be permitted to participate in an offer for buyback of shares by a company. Payment by the company would have to be made in cash and the offer would not be allowed to be withdrawn once it has been announced.

There could be six routes followed for buying back shares. These include a tender offer, open offer through stock exchanges, dutch auction or reverse book-building process, reverse rights issue, odd-lots and employee stock options.

The Sebi board is now expected to take up the guidelines on buyback at its board meeting slated for November 10. It is expected that the regulator would be able to complete the draft guidelines by then.