The `concept' rules for the new company law proposed by the Ministry also allows for share buy-back by unlisted public and private companies.

Richa Mishra
K.R. Srivats

New Delhi, Feb. 18

THE Ministry of Company Affairs (MCA) would play a role in regulating the buy-back programmes of listed companies after the enactment of a simplified company law if the `concept' rules now proposed under new company law are anything to go by.

Instead of leaving the regulatory requirements to be spelt out exclusively by SEBI regulations on share buy-back, the `concept' rules have gone on to spell out in detail, the manner in which a company can put a buy-back programme through.

It requires, for instance, listed public companies to necessarily adopt one of the four methods specified by it for the purpose of buy back of its own shares or specified securities.

The methods specified for buy-back of shares, under the concept rules, include purchase from the existing shareholders on a proportionate basis, or from open market, or from odd lots, or by purchasing the securities issued to employees of the company pursuant to a scheme of stock option or sweat equity.

This will be over and above whatever that may be stipulated by SEBI through its own regulations on the subject.

This implies that, while SEBI can modify its regulations from time-to-time, it cannot contradict any of the requirements now proposed under the `concept' rules after they become part of the new simplified company law.

Official sources maintained that the requirement of adherence to both MCA norms and the SEBI regulations would bring in more rigour to the buy-back framework and ensure better corporate governance among listed entities.

After the enactment of a new company law, the buy-back of shares or securities would be principally administered through the rules.

The advantage of such a move would be that changes, if any, could be brought through Executive action.

The `concept' rules for the new company law proposed by the Ministry also allows for share buy-back by unlisted public and private companies.

The `concept' rules separately specifies the methods that could be adopted by unlisted public limited companies or private companies for purchase of their shares or specified securities.

Such companies can buy-back shares or specified securities from the existing shareholders on a proportionate basis or purchase the securities issued to employees of the company pursuant to a scheme of stock option or sweat equity.

(This article was published in the Business Line print edition dated February 19, 2005)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.