Efforts to boost the depressed market sentiment gained momentum on
16 October when the government announced radical changes in the
share buyback norms.
Companies will now be allowed to buy back up to 10 per cent of
their equity by merely taking their boards approval. They dont
have to seek the approval of the shareholders anymore.
Earlier, it was mandatory
for the company to seek approval of the shareholders if it wanted
to buy back up to 25 per cent of the paid up capital.
Further, companies will
now be able to issue fresh equity shares after a period of six
months of the buyback instead of the previous cutoff period of 12
months. Companies going in for a buyback will not be allowed to do
so again for at least one year from the date of the first buyback.
This is to prevent companies from buying back shares frequently.
Sebi had advised the
government against bypassing the shareholders
for the buyback of shares saying this would allow large
shareholders to marginalise small
shareholders. But the government had turned down Sebis advice.
Analysts are of the view
that the new regulation will have a positive impact on the market