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OBLIGATIONS OF THE MERCHANT BANKER

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OBLIGATIONS OF THE MERCHANT BANKER
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Sunanda K. Chavan
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OBLIGATIONS OF THE MERCHANT BANKER - September 13th, 2010

OBLIGATIONS OF THE MERCHANT BANKER


A company has to appoint a merchant banker for carrying out buyback operations.

The merchant banker shall ensure that the company is able to implement buyback.

To ensure that the escrow account requirement is fulfilled.

To ensure that the public announcement has been made in compliance with the Regulations & the offer has been duly filed.

To ensure compliance by the company provisions of sections 77A & 77B and any other laws or rules.

On completion of the buyback obligation by the company, the merchant banker has to inform the bank for release of securities from the escrow account.

A final report has to be sent to SEBI on completion of buyback.

TAX IMPLICATIONS OF BUYBACK OF SHARES.


According to section 46A of income tax buyback of shares is treated as ordinary sale of shares by the shareholder.

The amount received less cost of acquisition is treated as capital gain in the year of sale by the shareholder.

METHODS OF BUYBACK OF SHARES

The company can buy back its shares in any of the following manners:-

1. From the existing shareholders on a proportionate basis through the tender offer.
2 From open market through a)Stock exchange b) Book building process.
3. From odd-lot holders

BUYBACK THROUGH THE TENDEROFFER


In this method, the company fixes and announces a price at which the buyback procedure will be carried out.

In this method, it is permissible for the promoters to offer their shares for buy-back, provided they make specified disclosures as follows -

The quantum of shares proposed to be tendered, &

The details of their transactions and their holdings for the last six months prior to the passing of the special resolution for buy-back including information of number of shares acquired, the price and the date of acquisition.

A public announcement before the buy-back has to be made in at least one English National Daily, one Hindi National Daily and a Regional language daily at the place where the Registered office of the company is situated and shall contain all the material information

The public announcement shall specify a date, which shall be the `specified date’ for the purpose of determining the names of the shareholders to whom the letter of offer shall be sent.

The specified date shall not be earlier than thirty days and not later than forty-two days from the date of the public announcement.

The Company shall within seven working days of the public announcement shall file with the Board a draft-letter of offer containing disclosures through a merchant banker who is not associated with the company.

The draft letter shall be accompanied with the fees.

The letter of offer shall be dispatched not earlier than twenty-one days from its submission to the Board.

The offer for buy back shall remain open to the members for a period not less than fifteen days and not exceeding thirty days.

The date of the opening of the offer shall not be earlier than seven days or later than thirty days after the specified date.

The letter of offer shall be sent to the shareholders so as to reach the shareholders before the opening of the offer.


The company shall complete the verifications of the offers received within fifteen days of the closure of the offer

The deposit in the escrow account shall be made before the opening of the offer


The company shall within 7 days make payment of consideration in cash or bank draft/pay order to those shareholders whose offer has been accepted or return the share certificates to the shareholders.

The company shall extinguish and physically destroy the share certificates so bought-back within 7 days from the date of acceptance of the shares.
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Re: OBLIGATIONS OF THE MERCHANT BANKER - June 29th, 2015

Roles and Responsibilities MERCHANT BANKER

1) Educating the applicant company

2) Due diligence & DRHP Preparation

3) Display of offer document on website.

4) Market Making arrangement

5) Underwriting arrangementArrangement with nominated investors

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Re: OBLIGATIONS OF THE MERCHANT BANKER - April 21st, 2016

Quote:
Originally Posted by sunandaC View Post
OBLIGATIONS OF THE MERCHANT BANKER


A company has to appoint a merchant banker for carrying out buyback operations.

The merchant banker shall ensure that the company is able to implement buyback.

To ensure that the escrow account requirement is fulfilled.

To ensure that the public announcement has been made in compliance with the Regulations & the offer has been duly filed.

To ensure compliance by the company provisions of sections 77A & 77B and any other laws or rules.

On completion of the buyback obligation by the company, the merchant banker has to inform the bank for release of securities from the escrow account.

A final report has to be sent to SEBI on completion of buyback.

TAX IMPLICATIONS OF BUYBACK OF SHARES.


According to section 46A of income tax buyback of shares is treated as ordinary sale of shares by the shareholder.

The amount received less cost of acquisition is treated as capital gain in the year of sale by the shareholder.

METHODS OF BUYBACK OF SHARES

The company can buy back its shares in any of the following manners:-

1. From the existing shareholders on a proportionate basis through the tender offer.
2 From open market through a)Stock exchange b) Book building process.
3. From odd-lot holders

BUYBACK THROUGH THE TENDEROFFER


In this method, the company fixes and announces a price at which the buyback procedure will be carried out.

In this method, it is permissible for the promoters to offer their shares for buy-back, provided they make specified disclosures as follows -

The quantum of shares proposed to be tendered, &

The details of their transactions and their holdings for the last six months prior to the passing of the special resolution for buy-back including information of number of shares acquired, the price and the date of acquisition.

A public announcement before the buy-back has to be made in at least one English National Daily, one Hindi National Daily and a Regional language daily at the place where the Registered office of the company is situated and shall contain all the material information

The public announcement shall specify a date, which shall be the `specified date’ for the purpose of determining the names of the shareholders to whom the letter of offer shall be sent.

The specified date shall not be earlier than thirty days and not later than forty-two days from the date of the public announcement.

The Company shall within seven working days of the public announcement shall file with the Board a draft-letter of offer containing disclosures through a merchant banker who is not associated with the company.

The draft letter shall be accompanied with the fees.

The letter of offer shall be dispatched not earlier than twenty-one days from its submission to the Board.

The offer for buy back shall remain open to the members for a period not less than fifteen days and not exceeding thirty days.

The date of the opening of the offer shall not be earlier than seven days or later than thirty days after the specified date.

The letter of offer shall be sent to the shareholders so as to reach the shareholders before the opening of the offer.


The company shall complete the verifications of the offers received within fifteen days of the closure of the offer

The deposit in the escrow account shall be made before the opening of the offer


The company shall within 7 days make payment of consideration in cash or bank draft/pay order to those shareholders whose offer has been accepted or return the share certificates to the shareholders.

The company shall extinguish and physically destroy the share certificates so bought-back within 7 days from the date of acceptance of the shares.
Hello dear,

Here I am sharing Lean of Merchant Banking, so please download and check it.
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