Soon after the announcement, the price of the scrip is bound to go up. Companies will find it difficult to take advantage of low prices prevailing in the market as there would be virtually no sellers expecting a revision of price as in the case of creeping acquisition. However, the company will have to go through the long-drawn process of taking approval from shareholders for a revision. Once the announcement is made, the price will start marching towards the maximum price indicated in the special resolution.

Companies resorting to buyback have the option of buying back from the existing shareholders through a tender offer on a proportionate basis. Besides, they can buy from the open market through book-building process, stock exchange and from odd-lot holders.

According to the Sebi regulations, which were notified on November 14, ``the company shall appoint a merchant banker and make a public announcement as referred to in regulation and; the public announcement shall be made at least seven days prior to the commencement of buyback...''

The buyback from the stock exchanges will be on the basis of the maximum price determined by a special resolution. The Sebi regulation requires that ``the public announcement shall also contain disclosures regarding details of the brokers and stock exchanges through which the buy-back of shares would be made.''

The buy-back of shares have to be made only through the order matching mechanism except ``all or none'' order matching system. The shares cannot be bought back from the promoters or persons in control of the company, according to the Sebi guideline.

Companies will have to file a copy of the announcement with Sebi two days before the public announcement is made.

The company and the merchant banker have to give the information to the stock exchange on a daily basis regarding the shares purchased for buy-back and the same shall be published in a national daily. Besides, the identity of the company as a purchaser has to appear on the electronic screen when the order is placed.

The company has to complete the verification of acceptances within fifteen days of the pay-out. Shares bought back from the market have to be extinguished.

The market regulator has also prescribed penalties for violation of the regulations. Those found guilty can be prevented from dealing on the stock exchanges. The regulator will prevent cancellation of securities if it is convinced of violations of the rules in the buyback process.

The company or the directors involved and found guilty will be denied permission to access the capital market. Besides, Sebi will also take action based on insider trading laws.

The regulation, which has kept negotiated deals and spot transactions out, requires that companies pass a special resolution. A copy of the resolution has to be filed with the stock exchanges within seven days from the date on which it is passed.

The explanatory memorandum to the resolution, in case the company decides to buyback from existing shareholders have to mention the following: The buyback price; if the promoter intends to offer their shares, the quantum of shares proposed to be tendered, and the details of their transactions and their holdings for the last six-months prior to the passing of the special resolution for buy-back including information of number of shares acquired, the price and the date of acquisition.

The public announcement, to be made by the company, should specify the date for determining the name of shareholders to whom offer letters have been sent. The specified date shall not be earlier than 30 days and not later than 42 days from the date of the public announcement. The offer for buy back will remain open to the members for a period not less than fifteen days and not exceeding thirty days. The date of the opening of the offer shall not be earlier than seven days or later than thirty days after the specified date.