Definitions

Written By BareMinLaw

Regulation 1. Short Title & Commencement

1(1).

  • These regulations are formally named the Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 2018.

1(2).

  • These regulations become effective from a specific date.

  • This effective date is the date on which they are published.

  • The publication must be in the Official Gazette of India.

  • Therefore, the regulations come into force immediately upon such official publication.

Regulation 2. Definitions

2(i).

  • The definitions provided apply throughout these regulations.

  • These definitions are to be used for interpreting terms used in the regulations.

  • However, this applies only unless the context requires a different meaning.

  • So , in special situations, the meaning of a term may change based on context.

(a). Act

  • Act means the Securities and Exchange Board of India Act, 1992.

(b). Associate

  • Associate refers to a person connected with the company in certain ways.

  • (i).

    1. It includes a person who directly or indirectly exercises control over the company.

    2. Such control may be exercised: Individually, or Together with relatives.

  • (ii).

    1. It also includes a person whose employee, officer, or director is:

      1. Also an employee, or

      2. An officer, or

      3. A director of the same company.

(c). Board

  • Board refers to the Securities and Exchange Board of India (SEBI).

  • It is the regulatory authority established under Section 3 of the relevant Act.

(d). Buyback Period

  • Buyback period means the time duration relating to a company’s buyback process.

  • It starts from:

    1. The date of the Board of Directors’ resolution, or

    2. The date of declaration of results of the postal ballot (special resolution),

    3. Whichever is applicable for authorizing the buyback.

  • It ends on: The date when payment is made to shareholders who have accepted the buyback offer.

(e). Control

  • The definition of control is the same as provided in SEBI (SAST) Regulations , 2011 in clause 2(e).

  • In accordance with 2(e) of SEBI (SAST) Regulations , 2011 , Control means:

  • Control includes:

    1. The right to appoint a majority of the directors.

    2. The power to control management decisions.

    3. The power to influence or determine policy decisions.

  • Such control may be exercised by a single person, or multiple persons acting individually or in concert.

  • Control may be exercised directly, or indirectly..

  • Control can arise through:

    1. Shareholding.

    2. Management rights.

    3. Shareholders’ agreements.

    4. Voting agreements.

    5. Any other manner.

  • It is provided that:

    1. A director of the target company is not automatically in control.

    2. An officer of the target company is also not automatically in control.

    3. So, merely holding the position of director or officer is not sufficient.

    4. There must be additional rights or powers (such as special voting rights, agreements, or majority board control) to establish control.


(f). Company

  • Company refers to a company as defined under the Companies Act, 2013.

    1. It must be a company whose shares or other specified securities are listed on a stock exchange.

    2. It includes a company which Buys, or Intends to buy its own shares or other specified securities.

  • Such buyback must be carried out in accordance with these regulations.

(g). Companies Act

  • Companies Act means the Companies Act, 2013.

(ga). Frequently Traded Shares

  • The definition of Frequently Traded shares is the same as provided in SEBI (SAST) Regulations , 2011 in clause 2(j).

  • In accordance with 2(j) of SEBI (SAST) Regulations , 2011 , Frequently Traded Shares means:

  • Frequently traded shares

    1. Frequently traded shares are shares that are actively bought and sold in the market.

      1. These shares are not rarely or occasionally traded.

      2. SEBI uses the concept of frequently traded shares to check how liquid a company’s shares are.

      3. If a company’s shares are traded often then their market price is considered reliable.

      4. SEBI may use such market prices for calculations.

      5. If shares are not frequently traded, SEBI applies different valuation methods.

(h). Insider

  • The definition of Insider is the same as provided in SEBI (Issue of Capital and Disclosure Requirements) Regulations , 2015 in clause 2(1)(i)(g).

  • In accordance with 2(1)(i)(g) of SEBI (Issue of Capital and Disclosure Requirements) Regulations , 2015 , Insider means:


(i). Merchant Banker

  • The definition of Merchant Banker is the same as provided in SEBI (Merchant Bankers) Regulations , 1992 in clause 2(cb).

  • In accordance with 2(cb) of SEBI (Merchant Bankers) Regulations , 2011 , Merchant Banker means:


(j). [Omitted]


(k). Promoter

  • Promoter has the same meaning as defined under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

  • No separate or different definition is created under these regulations.


(l). Registrar


(la). Secretarial Auditor


(m). Securities


(n). Small Shareholder

  • Small shareholder refers to a shareholder of a company.

  • It includes a shareholder who holds Shares, or Other specified securities of the company.

  • The classification depends on the market value of such holdings.

  • The market value is calculated:

    1. Based on the closing price of the shares/securities.

    2. On the Recognised Stock Exchange where highest trading volume of such securities is recorded.

    3. As on the record date.

  • The key threshold condition is the total market value of such holdings must not exceed ₹2,00,000.

(n). Specified Securities - (n-mentioned as n again in the Act.)

  • Specified securities refers to certain types of securities covered under these regulations.

  • It includes employees’ stock options (ESOPs).

    1. It also includes any other securities that may be notified by the Central Government from time to time.

    2. So , the scope of “specified securities” is not fixed.

    3. It can expand based on future notifications issued by the Government of India.


(o). Statutory Auditor

  • Statutory auditor refers to an auditor of a company.

  • Such auditor must be appointed under Section 139 of the Companies Act, 2013.

(p). Stock Exchange

  • Stock exchange refers to a stock exchange.

  • It must be one that has been granted recognition.

  • Such recognition must be given under Section 4 of the Securities Contracts (Regulation) Act, 1956.

(q). Tender Offer

  • Tender offer refers to a method of buy-back by a company.

    1. It involves an offer made by the company to buy back its own securities.

    2. The securities may include Shares, or Other specified securities

  • The offer is made through a letter of offer.

    1. This letter is sent to the existing holders of such securities.

    2. The holders then have the option to tender (offer) their securities back to the company.


(r). Unpublished Price Sensitive Information (UPSI)


(s). Working Day

  • It means any working day of the Board.

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Conditions of Buy-Back