---
title: "Buy-Backs: Changed Rules"
date: 2026-08-03
author: "KM Team"
url: https://acuitylaw.co.in/buy-backs-changed-rules/
---

# Buy-Backs: Changed Rules

Posted On - 3 August, 2026 • By - KM Team

![](https://acuitylaw.co.in/wp-content/uploads/2026/08/pexels-rdne-7947742-scaled-e1785749759596.jpg)

The Securities and Exchange Board of India (“SEBI”) notified the SEBI (Buy-Back of Securities) (Amendment) Regulations, 2026 (“Amendment”) on 1 July 2026, to take effect on 1 August 2026. The Amendment restores open market buy-back through the stock exchange, a route that had been withdrawn with effect from 1 April 2025, and in doing so recasts a significant part of the SEBI (Buy-Back of Securities) Regulations, 2018 (“Buy-Back Regulations”). Alongside the restoration, SEBI has fixed the execution window at sixty-six working days, made the appointment of a merchant banker discretionary and reallocated the merchant banker’s functions where none is appointed, introduced an ISIN-level freeze on promoter shareholding, made compliance with minimum public shareholding requirements an express pre-condition, and required direct electronic intimation to shareholders. Two relaxations that are easy to overlook have also been made: the separate trading window and the requirement that the company’s identity appear on the trading screen have both been removed. This note sets out the principal changes and their practical implications for listed companies. References to regulations are to the Buy-Back Regulations as amended with effect from 1 August 2026.

**1. When was the Amendment notified and when does it come into force?**

The Amendment was notified on 1 July 2026 vide Notification No. SEBI/LAD-NRO/GN/2026/306 and published in the Gazette of India (Part III, Section 4) on the same date. It comes into force on 1 August 2026. The amendments were approved by the SEBI Board at its meeting on 19 June 2026, following consultation papers issued in April and May 2026.

**2. Why has SEBI amended the buy-back framework?**

The stock exchange route was phased down between 2023 and 2025 and withdrawn from 1 April 2025, principally because the tax regime then in force produced materially different outcomes for shareholders who participated in a buy-back and those who did not. That objection has fallen away following the change in the taxation of buy-back consideration, and SEBI has recorded that public shareholders are now taxed on capital gains in a buy-back in the same manner as on a sale of shares in the ordinary course on the stock exchange. SEBI has also recorded that several industry associations had sought reinstatement of the route. The reinstatement is accompanied by a tightening of the execution, disclosure and surveillance requirements rather than a wholesale liberalisation.

**3. What is the most significant change introduced by the Amendment?**

The reinstatement of open market buy-back through the stock exchange with effect from 1 August 2026. SEBI has achieved this by two drafting steps in regulation 4(iv)(b). The existing proviso barring the route with effect from 1 April 2025 has been given a terminal date of 31 July 2026 rather than being deleted, and a new third proviso supplies the rule applicable from 1 August 2026. The route accordingly stands suspended for the period 1 April 2025 to 31 July 2026 and revives thereafter. A corresponding change has been made to the proviso to regulation 17(ii).

**Stock Exchange Route**

**4. Can every listed company use the stock exchange route for buy-backs?**

No. Under the third proviso to regulation 4(iv)(b), a buy-back through the stock exchange must be less than fifteen per cent of the paid-up capital and free reserves of the company, based on both the standalone and the consolidated financial statements. Two points deserve attention. First, the threshold is “less than” fifteen per cent, not up to fifteen per cent. Second, the test applies on both sets of financial statements, so the buy-back must clear the threshold on each basis. This differs from regulation 4(i) and regulation 4(ii), where the twenty-five per cent overall ceiling and the 2:1 debt to capital and free reserves test are applied on the standalone or consolidated financial statements, whichever sets out the lower amount. The overall ceiling in regulation 4(i) and section 68 of the Companies Act, 2013, the debt-equity condition in regulation 4(ii), and the requirement of a special resolution unless the buy-back is ten per cent or less of paid-up equity capital and free reserves under regulation 5(i)(b), continue to apply. Regulation 16(v) further restricts the route to frequently traded shares, and regulation 16(vi) subjects it to such restrictions on placement of bids, price and volume as the Board may specify. Regulation 16(ii) continues to bar purchases from promoters or persons in control through the stock exchange.

**5. What timeline applies to a stock exchange buy-back?**

New regulation 17(iii) requires the offer to open within four working days from the date of the public announcement and to close within sixty-six working days from the date of opening. The sixty-six working day window is not new in concept: it applied to offers opened between 1 April 2023 and 31 March 2024, before being compressed to twenty-two working days for offers opened between 1 April 2024 and 31 March 2025. The reinstated framework therefore returns to the intermediate position, not to the six month window, which applied only to offers opened on or before 31 March 2023. Regulation 5(ii) continues to require every buy-back to be completed within one year from the date of the special resolution or the board resolution, as the case may be.

**6. Are there any utilisation requirements during the buy-back period?**

Yes, but they are not introduced by the Amendment. Regulation 15, as it has stood since the 2023 amendment, requires the company to utilise at least seventy-five per cent of the amount earmarked for the buy-back, and at least forty per cent of the earmarked amount within the initial half of the specified duration. What the Amendment does is make these obligations operative again for the stock exchange route, and it does so against a sixty-six working day clock. Shortfall attracts forfeiture of up to 2.5 per cent of the earmarked amount from the escrow account under regulation 20(viii), subject to the carve-outs in that sub-regulation where the volume weighted average market price during the buy-back period is higher than the buy-back price, where sell orders are inadequate despite buy orders placed by the company, or where circumstances beyond the company’s control merit consideration. Forfeited amounts are credited to the Investor Protection and Education Fund under regulation 20(ix).

**7. Has the Amendment relaxed the mechanics of execution on the exchange?**

Yes, in two respects, both effected by omission and both material. First, the Explanation to regulation 16(i), which required the stock exchange to create a separate window that remained open for the buy-back period, has been omitted. The buy-back will accordingly be executed through the ordinary order matching mechanism, other than the “all or none” system, under regulation 16(iii). Second, regulation 17(i), which required the identity of the company as purchaser to appear on the electronic screen when the order was placed, has been omitted, so the company will no longer be identified on screen order by order. Daily reporting to the stock exchange and on the company’s website under regulation 18 is unchanged, so transparency is preserved at the level of end-of-day aggregates rather than individual orders. The separate window for buy-back of shares held in physical form under regulation 19 continues.

**Merchant Banker**

**8. Is appointing a merchant banker still mandatory?**

No. New regulation 24A(1) provides that, notwithstanding anything contained in the Buy-Back Regulations, the requirement of engaging a merchant banker is discretionary. The non obstante wording matters, because the underlying obligations to appoint a merchant banker in regulation 16(iv)(a) and regulation 22A(i), and the references to the merchant banker throughout Chapters III to V, have been left in place. The option is available for all methods of buy-back, not only the stock exchange route.

**9. If a merchant banker is not appointed, who performs its functions?**

Regulation 24A(2) contains a table allocating nine functions. Filing of the letter of offer and public announcement with fees and ensuring that their contents are true, fair and adequate; submission of the final report; ensuring availability of funds and firm financial arrangements; and compliance with the relevant provisions of the Companies Act, 2013, fall on the company. Certification that the buy-back offer complies with the Buy-Back Regulations, and the due diligence certificate, fall on the secretarial auditor. Oversight and operation of the escrow account, including bank guarantees, cash deposits, approved securities, invocation rights, release of the escrow account and forfeiture-related directions issued by SEBI, falls on the statutory auditor. Certification as to the adequacy of sell orders and the volume weighted average price falls on the stock exchanges. Presence at the extinguishment and destruction of securities in an open market buy-back, and certification of compliance with extinguishment under regulation 11(iii)(a), fall on the compliance officer. The table sits in regulation 24A(2) itself. It has not been inserted into Schedule IV, which continues to prescribe the contents of the public announcement for an open market buy-back through the stock exchange.

**10. What should a board consider before dispensing with the merchant banker?**

The cost saving is straightforward, but the transfer of risk is not. Responsibility for the accuracy of the offer documents moves from an independent SEBI-registered intermediary to the company and, through regulation 24(i)(a), to its directors, who must state that they accept responsibility for the contents. Escrow oversight moves to the statutory auditor and diligence certification to the secretarial auditor, neither of whom will ordinarily have contracted for that role. Engagement letters, scope, fees and indemnities will need to be revisited, and the auditors’ own independence and capacity constraints considered. Schedule V fees remain payable, notwithstanding that the opening words of Schedule V are still framed by reference to the merchant banker. The option is likely to suit repeat issuers with mature internal capability and a straightforward capital structure rather than first-time or contentious buy-backs. The decision, and the basis for it, should be recorded in the board minutes.

**Compliance and Surveillance**

**11. What new restrictions have been introduced for promoters?**

New regulation 24(i)(ea) requires the shares or other specified securities held by the promoter(s) and promoter group, including their associates, for which the buy-back is undertaken, to remain frozen at the International Securities Identification Number (ISIN) level during the period from the date of passing of the board resolution or the special resolution, as the case may be, until the closing of the offer. The company must give the depositories the necessary instructions to give effect to the freeze. This operates alongside, and does not replace, the existing prohibition in regulation 24(i)(e) on promoters and their associates dealing in the company’s securities on or off market, including inter se transfers among promoters, over the same period. The practical significance is that a conduct obligation has been converted into a system-level block at the depository.

**12. Are there any exceptions to the ISIN freeze?**

Two, and both are narrow. Under regulation 24(i)(ea)(ii), in a buy-back through tender offer the freeze does not apply for the limited purpose of tendering shares or other specified securities into the offer. Under regulation 24(i)(ea)(iii), transfer pursuant to invocation of an encumbrance created before the commencement of the buy-back period may be allowed, but the freeze continues to apply to those securities following invocation, and the transfer is subject to such conditions as the Board may specify. There is no carve-out for inheritance, transmission or transfers under a court-approved scheme. Separately, regulation 24(ii) prohibits a public announcement of buy-back during the pendency of any scheme of amalgamation, compromise or arrangement under the Companies Act, 2013.

**13. Can a company undertake a buy-back if it results in a breach of minimum public shareholding?**

No. New regulation 4(xi) provides that a company shall not propose any offer of buy-back of shares or other specified securities that results in the breach of the minimum public shareholding requirements prescribed under the Securities Contracts (Regulation) Rules, 1957 or specified under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The prohibition bites at the proposal stage, so the assessment must be made and documented before the board or the shareholders approve the buy-back, and it applies to all methods of buy-back, not only the stock exchange route. The point was previously addressed through rule 19A of the Securities Contracts (Regulation) Rules, 1957 and as a matter of practice; it is now an express condition in the Buy-Back Regulations.

**14. Has SEBI introduced any additional disclosure obligations?**

Yes. The company must, within one working day from the date of the public announcement, send an intimation through electronic mode regarding the open market buy-back offer to those persons who were its shareholders as on the date of making the public announcement. The obligation has been inserted in identical terms in regulation 16(iv)(ba) for the stock exchange route and regulation 22A(v) for buy-back through book building. In practical terms, the register of members and the beneficial owner position as on the date of the public announcement must be captured immediately and the despatch completed within one working day, which needs to be built into the announcement timetable.

**15. Have the obligations relating to public announcements changed?**

Substantively, only modestly. Regulation 16(iv)(b) has been substituted to require the public announcement to be made within two working days from the date of passing of the resolution by the board of directors or the date of declaration of the results of the postal ballot for the special resolution, as the case may be, containing the disclosures specified in Schedule IV. Both the two working day period and the Schedule IV requirement are carried forward from the clause it replaces, so the substitution is largely one of drafting. In regulation 16(iv)(cb), the requirement that a copy of the public announcement be “placed” on the websites of the stock exchanges, the merchant banker and the company has been changed to “hosted”, which is best read as requiring the announcement to remain available rather than merely to be uploaded once. The requirement in regulation 16(iv)(c) to file the public announcement in electronic mode with the Board and the exchanges along with Schedule V fees, and the obligation of the exchanges under regulation 16(iv)(ca) to disseminate it forthwith, are unchanged.

**16. What has changed in relation to escrow arrangements?**

Three things. First, in regulation 20(ii) the word “may” has been substituted with “shall”, so the permitted forms of the escrow account, and the margin specified by the Board, are now mandatory rather than permissive. Second, regulation 20(iv)(a) has been substituted so that a bank guarantee forming part of the escrow must be in favour of the merchant banker and kept valid for thirty working days after the expiry of the buy-back period of the offer or after the completion of all obligations specified under the Buy-Back Regulations, whichever is later, and regulation 20(iv)(b) provides that the guarantee is to be returned by the merchant banker only after completion of all obligations. Corresponding drafting changes have been made to regulation 9(xi)(e) for tender offers, without altering its effect. Third, and importantly where no merchant banker is appointed, escrow oversight passes to the statutory auditor under regulation 24A(2). The quantum requirements are unchanged: twenty-five per cent of the earmarked amount deposited within two working days of the public announcement under regulation 20(i), and at least 2.5 per cent remaining in the escrow account at all times under regulations 20(v) and 20(vi).

**17. Has the interval between successive buy-backs changed?**

Yes. Regulation 4(vii) previously barred an offer of buy-back within a period of one year reckoned from the date of expiry of the buy-back period of the preceding offer. As substituted, it bars an offer within such period as may be prescribed under the Companies Act, 2013 from the date of closure of the preceding offer. Two changes follow. The source of the restriction is now the Companies Act, 2013, so the one year cooling-off in the proviso to section 68(2) applies and any future change to it will flow through without a further SEBI amendment. The reference point has also moved from expiry of the buy-back period, which under regulation 2(i)(d) runs until payment of consideration, to closure of the offer, which is earlier. The practical effect is a modest shortening of the interval between successive buy-backs.

**18. What has changed in relation to extinguishment of securities?**

The substantive requirements are unchanged. For a stock exchange buy-back, securities bought back during a month must be extinguished and physically destroyed on or before the fifteenth day of the succeeding month in the presence of the merchant banker and the secretarial auditor under regulation 21(iii), with all securities bought back extinguished within seven working days of expiry of the buy-back period, and the particulars furnished to the stock exchanges within seven working days under regulation 24(iv). Where no merchant banker is appointed, regulation 24A(2) places presence at extinguishment and certification of compliance with regulation 11(iii)(a) on the compliance officer.

**19. How much of the Amendment is substantive?**

A substantial part of it is drafting correction rather than change of law. Regulations 8(i), 9(xi)(c) to (g), 11, 16(iv), 20(ii), 20(iii), 20(iv), 20(viii), 21(iii), 22A(i) and 24 have been amended in numerous places to insert articles, to substitute “until” with “till” and “as” with “that”, to correct tense, and to change the marginal head of regulation 24 from “procedure” to “procedures”. Schedule V has been cleaned up by omitting the references to regulations 8(i)(c), which was omitted in 2023, and 22(iv), which fell away when regulation 22 was substituted in 2023 and its subject matter moved to regulation 22A. These should not be over-read. The provisions that change the legal position are the third proviso to regulation 4(iv)(b), regulations 4(vii) and 4(xi), the omission of the Explanation to regulation 16(i), regulations 16(iv)(b) and (ba), the omission of regulation 17(i) and the insertion of regulation 17(iii), regulations 20(ii) and 20(iv), regulation 22A(v), regulation 24(i)(ea) and regulation 24A.

**20. What is the transition position for buy-backs already under way?**

The Amendment does not alter the grandfathering in the proviso to regulation 17(ii), which continues to preserve offers that had opened on or before 31 March 2025. What it does to that proviso is to give the bar itself a terminal date of 31 July 2026, mirroring the change made to the second proviso to regulation 4(iv)(b). No new stock exchange buy-back can therefore open before 1 August 2026. The four working day opening requirement and the sixty-six working day closing requirement in regulation 17(iii) apply with effect from 1 August 2026. Regulations 4(vii), 4(xi), 24(i)(ea) and 24A apply to all buy-backs from 1 August 2026 regardless of method, so a tender offer in contemplation should be reviewed against the ISIN freeze and the minimum public shareholding condition even though neither provision is directed at the stock exchange route.

**Practical Implications**

**21. How do the Amendments impact listed companies?**

For a company with modest surplus capital and a liquid stock, the stock exchange route is again the least disruptive way of returning capital: no draft letter of offer or letter of offer is required to be filed with the Board under the Explanation to regulation 16(iv), no entitlement ratio or acceptance mechanics arise, and execution runs through the ordinary market. Against that, the sixty-six working day window read with the forty per cent and seventy-five per cent utilisation thresholds means the buy-back must be executed at pace, and a company that announces without the ability to execute risks forfeiture from the escrow account. The choice between the stock exchange route and a tender offer will now turn less on tax and more on execution certainty, size relative to the fifteen per cent limit, and whether promoter participation is intended, since promoters cannot sell into a stock exchange buy-back under regulation 16(ii).

**22. How do the Amendments balance regulatory flexibility with investor protection?**

SEBI has traded procedural relief for structural safeguards. On the relief side sit the discretionary merchant banker, the removal of the separate trading window and of on-screen identification of the company, and the revival of a route that had been closed. On the safeguard side sit the ISIN-level freeze, the minimum public shareholding condition, direct electronic intimation to shareholders, the fixed sixty-six working day timetable and the mandatory escrow forms. The design is consistent with SEBI’s stated ease-of-doing-business orientation: it removes intermediation and process while retaining, and in places increasing, the substantive obligations and the consequences of failure.

**23. What impact could these Amendments have on capital markets practice?**

Advisers should expect an increase in buy-back mandates from listed companies below the fifteen per cent threshold, and a change in the nature of the work. Where the merchant banker is dispensed with, the drafting and diligence burden moves to counsel and to the company’s own officers, and the allocation of responsibility among the company, the compliance officer, the secretarial auditor and the statutory auditor will need to be documented at the outset. Board minutes should record the decision under regulation 24A(1) and the basis on which the board is satisfied that the substitute obligations will be discharged.

**24. How has the change in the tax regime influenced these Amendments?**

The tax position has moved twice. Until 30 September 2024, buy-back proceeds attracted a company-level tax under section 115QA of the Income-tax Act, 1961 and were exempt in the shareholder’s hands, which produced materially different outcomes for participating and non-participating shareholders. From 1 October 2024, the buy-back tax was withdrawn and the entire consideration was treated as a deemed dividend taxable in the shareholder’s hands, with the cost of acquisition allowed as a capital loss. From 1 April 2026, the consideration is chargeable under the head capital gains, with the cost of acquisition taken into account in the computation. It is this third step, rather than the second, that removed the obstacle to the stock exchange route: SEBI’s stated basis is that public shareholders are now taxed on capital gains in a buy-back in the same way as on a sale of shares in the ordinary course on the stock exchange, so participating through the exchange no longer carries a distinct tax consequence. The tax analysis should be confirmed with tax advisers in each case.

**25. Do the Amendments reduce compliance obligations overall?**

No. The only genuine reductions are the optional merchant banker and the two omissions in regulations 16(i) and 17(i). Set against those are a fixed and shorter execution window, an additional shareholder intimation within one working day, an ISIN-level freeze requiring instructions to the depositories, an express minimum public shareholding condition, mandatory escrow forms, and, where no merchant banker is appointed, a set of certifications that must be procured from the auditors and the compliance officer. For a company that continues to appoint a merchant banker, the net effect is more onerous than the position before 1 August 2026.

**26. Which companies are likely to benefit the most from these Amendments?**

Listed companies with liquid, frequently traded shares, a buy-back size below fifteen per cent of paid-up capital and free reserves on both the standalone and the consolidated basis, headroom against the minimum public shareholding requirement, and the internal capability to execute within sixty-six working days. Companies with promoter holdings close to the seventy-five per cent ceiling, illiquid stock, or a need for promoter participation in the buy-back will continue to prefer the tender offer route.

**27. What is the key takeaway from the Amendment?**

The Amendment restores a route rather than relaxing a regime. A company that treats the stock exchange route as the low-friction option it was before 2023 will misjudge it: the utilisation obligations are enforceable against the escrow, the timetable is fixed, and the promoter freeze operates automatically at the depository. The decision to proceed, and the separate decision whether to dispense with the merchant banker, should each be taken and documented on a properly informed basis.

**Annexure: Summary of the substantive amendments**

| **Regulation** | **Position before 1 August 2026** | **Position from 1 August 2026** |
| --- | --- | --- |
| 4(iv)(b), second proviso | Buy-back from the open market through the stock exchange not allowed with effect from 1 April 2025, with no end date. | Bar confined to the period 1 April 2025 to 31 July 2026. |
| 4(iv)(b), third proviso | No corresponding provision. | Buy-back through the stock exchange must be less than fifteen per cent of paid-up capital and free reserves, based on both standalone and consolidated financial statements. |
| 4(vii) | No offer of buy-back within one year from the date of expiry of the buy-back period of the preceding offer. | No offer of buy-back within such period as may be prescribed under the Companies Act, 2013 from the date of closure of the preceding offer. |
| 4(xi) | No corresponding provision. | No offer of buy-back that results in breach of minimum public shareholding under the Securities Contracts (Regulation) Rules, 1957 or the LODR Regulations, 2015. |
| 16(i), Explanation | Stock exchange to create a separate window, open for the period specified in the regulations. | Omitted. Execution through the ordinary order matching mechanism. |
| 16(iv)(b) | Public announcement within two working days of the board resolution or declaration of postal ballot results, containing Schedule IV disclosures. | Substituted. Same two working day period and Schedule IV requirement, in recast language. |
| 16(iv)(ba) | No corresponding provision. | Electronic intimation to persons who were shareholders as on the date of the public announcement, within one working day of that announcement. |
| 16(iv)(cb) | Public announcement to be placed on the websites of the stock exchanges, merchant banker and company. | Public announcement to be hosted on those websites. |
| 17(i) | Identity of the company as purchaser to appear on the electronic screen when the order is placed. | Omitted. |
| 17(ii), proviso | Route unavailable with effect from 1 April 2025, with no end date, except for offers opened on or before 31 March 2025. | Bar given a terminal date of 31 July 2026. Grandfathering for offers opened on or before 31 March 2025 unchanged. |
| 17(iii) | No corresponding provision. | Offer to open within four working days of the public announcement and close within sixty-six working days of opening. |
| 20(ii) | Escrow account may be in the specified forms, subject to appropriate margin. | Escrow account shall be in the specified forms, subject to the margin specified by the Board. |
| 20(iv)(a) and (b) | Bank guarantee in favour of the merchant banker, valid for thirty working days after expiry of the buy-back period or till completion of all obligations, whichever is later; not returnable till completion. | Substituted in clarified terms. Validity runs to thirty working days after expiry of the buy-back period or after completion of all obligations, whichever is later; returnable only after completion of all obligations. |
| 22A(v) | No corresponding provision. | Electronic intimation to shareholders within one working day of the public announcement, for buy-back through book building. |
| 24(i)(ea) | No corresponding provision. | ISIN-level freeze on promoter and promoter group holdings from the enabling resolution until closing of the offer, subject to the tender offer and pre-existing encumbrance carve-outs. |
| 24A | No corresponding provision. | Appointment of a merchant banker made discretionary, with a table allocating nine functions to the company, secretarial auditor, statutory auditor, stock exchanges and compliance officer where none is appointed. |
| Schedule V | Fee provision referenced regulations 8(i)(c) and 22(iv). | References omitted. Regulation 8(i)(c) was omitted in 2023 and regulation 22(iv) fell away on the substitution of regulation 22 in 2023. |

This note is a general summary of the Amendment as notified and is not legal or tax advice. Position stated as at 30 July 2026.

For any queries or further engagement on the matters discussed in this paper, please reach out to Acuity Law at [[email protected]](/cdn-cgi/l/email-protection#66272a260705130f121f0a0711480509480f08).

***The information contained in this document is not legal advice or legal opinion. The contents recorded in the said document are for informational purposes only and should not be used for commercial purposes. Acuity Law LLP disclaims all liability to any person for any loss or damage caused by errors or omissions, whether arising from negligence, accident, or any other cause.*** 

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