In a memorandum submitted to the Law, Justice and Company Affairs Ministry, Assocham has asked for a reduction in the duration for new issue of shares by companies after buyback from 24 months stipulated in the ordinance to six months.

In a statement issued here on Thurdsay, the chamber has stated that the rigidity of the debt-equity ratio of 2:1 prescribed in the ordinance would cause considerable hardships to the corporates. ``Each sector of the industry required varying ratios for meaningful management of resources,'' the chamber stated. For instance, fertiliser sector requires a minimum debt equity ratio of 3:1 and power requires a ratio of 4:1 because of its capital intensity.

Assocham also asked the ministry to allow buybackthrough negotiated deals as large block of shares in companies were held by domestic financial institutions which are ``unlikely to participate in buyback through open offer route or through tendering route.''

Assocham said these blocks of shares would definitely command a higher price than share purchases from ordinary shareholders and therefore, uniform pricing for buyback of shares for all shareholders under a buyback proposal would not be feasible.

"Since liquidity in the market for many shares is not very high, to complete buyback through market purchases within 12 months the time limit does not seem to be practicable," Assocham president L Lakshman said in the memorandum. Another suggestion by assocham pertains to debt equity ratio requirement of 2:1 stipulated in the ordinance for companies going for buyback.

The chamber said the requirement totally leaves out financing companies from the purview of buyback of shares. Further, in certain capital intensive industries the permitted norms for debtequity ratio goes upto even 3:1. Assocham suggested that instead of laying debt equity ratio of 2:1, it may be prescribed depending on the class of companies.

On the issue of permitting buyback of shares for treasury operations, Ficci pointed out that such operation had many favourable spin offs. Besides, pepping up shares that are unduly low, the companies would be able to buyback its shares at attractive prices and with a greater certainty of future growth. It would also facilitate reissue of shares in a simpler and quicker manner than in the case of fresh equity of shares.

The companies should be allowed buyback through negotiations or other arrangements subject to the condition that no votes are cast in favour of the special resolutions by any person whose securities are supposed to be bought back. Ficci has further urged the government that the stipulation of further issue of securities be reduced to 12 months from the present stipulation of 24 months.