The Hindu Business Line : Exit route for shareholders — Irani panel moots one-time buyback by delisted cos

A ONE-TIME buyback offer for shareholders of a delisted company has been mooted to provide an exit route for shareholders who had not taken part in the delisting exercise.

The Dr J.J. Irani Committee on company law has suggested that any company that opted to delist its shares must be required to come up with a buyback offer within three years of delisting.

"The one-time buyback programme would benefit those shareholders who had not participated in the delisting exercise and are left with no other exit route after the company's securities are delisted," Ms Preeti Malhotra, member of the Irani Committee, told Business Line. She said the committee has recommended that the Government should prescribe appropriate valuation rules for such a buyback.

The Irani committee, set up by the Ministry of Company Affairs to advise the Government on a new company law, submitted its report to the Ministry on Tuesday.

To protect the rights of minority shareholders and also for investor protection, the Irani committee has also suggested that the new company law should recognise principles such as `class actions' and `derivative actions'.

Derivative actions are brought about by shareholders (on behalf of the company) against directors, management or other shareholders for a failure by the management. A class action is where one shareholder on behalf of one or more of the shareholders of the same kind are allowed by courts on the grounds of same locus standi. It allows a group of individuals with a claim against a company or an individual to join together as plaintiffs in a single suit.

"The committee wants the company law to specifically recognise these two principles. These principles have been upheld by courts," Ms Malhotra said.

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Exit route for shareholders — Irani panel moots one-time buyback by delisted cos