SEBI Asks Depositories To Freeze Promoter Holdings During Buyback Period

The Securities and Exchange Board of India (SEBI) has introduced a fresh requirement for depositories in cases where listed companies announce share buybacks. Going forward, promoter and promoter group holdings will have to be frozen at the security (ISIN) level for the duration of the buyback process.

The restriction will come into force once a company's board or shareholders approve the buyback proposal and will remain in place until the offer closes.

Promoters Can Still Participate In Tender Offers

The freeze does not stop promoters from taking part in buybacks carried out through the tender offer route.

SEBI has clarified that promoters will continue to be allowed to tender their shares under such offers even though their holdings remain frozen during the buyback period.

Existing Pledges Will Continue To Be Honoured

The regulator has also carved out an exception for pledges and other encumbrances that were already in existence before the buyback began.

Where such arrangements have been created in advance, lenders will still be able to invoke them in accordance with the existing terms despite the temporary freeze on promoter holdings.

Depositories Asked To Roll Out Operational Framework

Depositories have been instructed to develop the necessary operational systems and issue detailed implementation guidelines before 1 August.

Among other things, the framework will specify:

• The format that listed companies must follow to request the freezing of promoter holdings.

• The operational process for implementing the ISIN-level freeze.

• The mechanism through which promoters can tender shares during buybacks.

• The procedure for invoking or releasing pre-existing pledges and other encumbrances.

SEBI has also directed listed companies, stock exchanges, depositories, merchant bankers, registrars and share transfer agents (RTAs) to comply with the new operational requirements once they come into effect.

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