The Composite Scheme Structure
A composite scheme may combine a merger with a buy-back of the transferee’s shares. The buy-back is a separate corporate action, and it must satisfy the conditions of Section 68 of the Companies Act: the buy-back must be authorised by the articles, approved by a special resolution (or the board, where the buy-back is within the prescribed limit), and funded from the permitted sources. The buy-back cannot be used as a device to circumvent the scheme’s approval requirements.
The SEBI Buy-Back Regulations
For a listed company, the buy-back must comply with the SEBI (Buy-Back of Securities) Regulations, 2018. The regulations prescribe the methods (tender offer, open market, book building), the maximum limit, the disclosure requirements, and the timeline. The scheme’s buy-back component must be integrated with the SEBI process, and the NCLT’s order should record the buy-back’s terms.
The Capital Reduction Overlap
A buy-back that is funded from capital and that results in a reduction of share capital may also require the NCLT’s confirmation under Section 66. The scheme should address whether the buy-back is a standalone buy-back or a capital reduction, because the approval route and the creditor-protection requirements differ.
The Practical Sequencing
The buy-back should be approved by the board and the shareholders before or alongside the scheme’s approval. The NCLT should be informed of the buy-back and its funding, and the scheme should provide for the buy-back’s implementation after the effective date. A buy-back that is implemented without the SEBI or Section 68 compliance is void.
Call to Action: For composite scheme buy-back structuring, Section 68 compliance, or SEBI Buy-Back Regulations advisory, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.