The Securities and Exchange Board of India’s revised framework for buy-backs marks a structural change in the execution and compliance architecture applicable to listed companies. Alongside reintroducing open-market buy-backs through the stock-exchange route with effect from August 1, 2026, SEBI has made the appointment of a merchant banker discretionary for buy-backs. Where a company does not appoint a merchant banker, functions previously vested/performed by merchant bankers are distributed among the company, its compliance officer, statutory auditor, secretarial auditor and the stock exchanges.
The significance of the revised framework therefore extends beyond the return of the stock-exchange route. It introduces an alternative model of transaction accountability: the regulatory functions associated with a buy-back remain, but their performance no longer necessarily depends upon the a a single category of registered transaction intermediary.
Regulatory background to the revived stock-exchange route
SEBI’s reconsideration of open-market buy-backs through stock exchanges followed changes in both the regulatory and taxation context. The April 2026 consultation paper noted that the earlier concerns underlying discontinuation of the route included the inability to identify whether a shareholder’s trade had resulted in participation in the buy-back and the resulting tax-induced inequity among public shareholders.
In reconsidering the route, SEBI recorded that the revised taxation framework had addressed the earlier concern regarding differential tax treatment. The April consultation paper also noted that execution under an order-driven market mechanism is determined through price-time matching, giving public shareholders an equal opportunity to participate under uniform conditions. SEBI further identified continuous price discovery and liquidity as features of the stock-exchange route.
The SEBI Board subsequently approved reintroduction of the route from August 1, 2026. The approved framework requires completion of an open-market buy-back through the stock exchange within 66 working days from its opening, with at least 40% of the amount earmarked for the buy-back to be utilised during the first half of the buy-back period.
Merchant banker appointment becomes discretionary
The change in the role of merchant bankers emerged from SEBI’s broader review and rationalisation of the SEBI Buy-Back Regulations. Under the framework considered in the May 2026 consultation paper, merchant bankers were mandatorily appointed and performed functions including filing-related activities, dissemination, escrow-related compliance and oversight of regulatory compliance.
SEBI’s review proceeded on three stated considerations. First, it observed that the securities market ecosystem had evolved through continuous disclosure mechanisms and enhanced governance frameworks. Second, it noted that several functions performed by merchant bankers were procedural or operational and capable of being performed by the company or other market infrastructure institutions. Third, the Board of Directors remained responsible for matters including correctness of disclosures, statutory compliance, the declaration of solvency and extinguishment of securities.
The May consultation paper proposed dispensing with mandatory merchant banker appointment and reallocating existing functions. The SEBI-approved framework, however, framed the final position as one of discretionary appointment: a company may appoint a merchant banker, but where it elects not to do so, the functions otherwise undertaken by the merchant banker are allocated across the company, compliance officer, statutory auditor, secretarial auditor and stock exchanges.
This distinction is material. The framework does not dispense with the underlying compliance functions merely because no merchant banker is appointed. Instead, it changes the identity of the actor responsible for performing particular functions.
A distributed model of transaction responsibility
The May consultation paper provides the clearest regulatory background to the redistribution exercise. Its Annexure I mapped existing merchant banker functions against proposed alternative responsibility holders. The company was proposed to assume responsibility for filing the letter of offer and public announcement, payment of applicable fees and ensuring that the relevant disclosure documents were true, fair and adequate. The company was also proposed to assume responsibility for the final report, ensuring the availability of funds and firm financial arrangements for implementation of the buy-back, and compliance with the relevant provisions of the Companies Act, 2013.
Certification and assurance functions were separated from these issuer responsibilities. The consultation proposed assigning certification of compliance with the Buy-Back Regulations and the due diligence certification function to the secretarial auditor. The Board decision subsequently identified both the statutory auditor and secretarial auditor among the actors to whom responsibilities are allocated where a merchant banker is not appointed.
The execution-side architecture similarly moves away from reliance upon a single intermediary. Under the consultation proposal, oversight and operation of escrow arrangements, including specified functions concerning bank guarantees, cash deposits, approved securities, invocation and release, were proposed to be assigned to the designated stock exchange. Certification relating to adequacy of sell orders and volume-weighted average price was also proposed to be undertaken by stock exchanges.
The consultation paper proposed assigning the merchant banker’s presence during extinguishment or destruction of securities acquired through an open-market buy-back, and verification of compliance with extinguishment requirements, to the company’s compliance officer.
The regulatory design, therefore, is one of functional separation. Issuer-side filing and funding responsibilities, independent certification, market-infrastructure oversight and internal compliance functions are allocated to different actors already done with some success forrights issues..
Execution safeguards under the revived route
The revised framework also modifies the mechanics of open-market execution. The SEBI decision records that, given the changed taxation framework and the prohibition on promoter participation in open-market buy-backs, transactions under the stock-exchange route will be treated as normal trading transactions. Accordingly, the earlier requirements for a separate trading window and display of the company’s identity as purchaser on the trading screen have been dispensed with.
This represents a material difference from the April consultation paper, which had proposed reintroducing the route by applying the existing framework under the SEBI Buy-Back Regulations and circulars issued thereunder. That paper referred to the then-existing framework, including restrictions on volume, timing of bid placement and the permissible price range for orders. The final Board-approved position expressly removes the separate-window and purchaser-identity requirements; accordingly, the consultation proposal should not be treated as an exact statement of the final execution architecture.
Other safeguards operate around participation and execution. Promoters and their associates cannot participate in the open-market buy-back, and their shares or other specified securities are required to remain frozen at the ISIN level during the buy-back period. SEBI stated that this measure is intended to prevent inadvertent dealing during the buy-back period, which is sagacious in the day and age of wealth managers and portfolio managers.
The framework also requires proposed buy-backs to continue to comply with minimum public shareholding requirements.
Disclosure and shareholder communication
The framework retains public disclosure as a central component of the transaction while adding a direct shareholder communication requirement. The SEBI decision provides that information regarding open-market buy-backs must be disseminated to shareholders electronically, in addition to the public announcement already made through newspaper advertisements.
The redistribution of responsibility is particularly relevant here. The May consultation paper proposed that filing and public-announcement responsibilities previously associated with the merchant banker be performed by the company itself.
Optionality in merchant banker appointment does not remove the disclosure framework. Where no merchant banker is appointed, the architecture instead places issuer-facing disclosure responsibilities directly within the company-led compliance process, while retaining independent and infrastructure-level functions with other identified actors.
Implications for the transaction execution ecosystem
The revised framework changes the institutional structure of buy-back execution without eliminating the underlying regulatory controls. For merchant bankers, their role remains part of the transaction commercial structure.
For listed companies, proceeding without a merchant banker does not create a reduced-compliance route. Filing, funding, certification, escrow oversight, transaction execution, extinguishment and final reporting remain regulated functions, but responsibility for them is allocated across the issuer and specified assurance, compliance and market-infrastructure actors.
The principal regulatory significance of the amendment therefore lies in the movement from mandatory intermediary-led coordination to function-specific accountability. The revised model preserves the regulatory components of a buy-back transaction while allowing companies discretion over whether those components are coordinated through an appointed merchant banker or discharged through the alternative responsibility architecture established by the framework.
Authored by: Sourav Modi, Partner and Rashmita Das, Legal Researcher.
