Promoter buys shares

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Querist : Anonymous

Querist : Anonymous (Querist)

13 March 2015 In listed company, if promoter wants to buy / acquire shares of his own company to increase his stake from open market, what is procedure required to be followed pre and post buying of shares with roc / stock exchange

Querist : Anonymous

Querist : Anonymous (Querist)

16 March 2015 Any idea of compliance post n pre buying of shares

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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10 August 2024 When a promoter of a listed company wishes to buy or acquire shares of their own company from the open market, they must adhere to several regulatory requirements both pre and post the acquisition. Here’s a summary of the procedure and compliance requirements as per Indian regulations:

### **1. Pre-Buying Compliance**

#### **1.1 Disclosure of Intention**
- **Intimation to Stock Exchange**: The promoter must disclose their intention to the stock exchanges (NSE, BSE) where the company's shares are listed. This disclosure is generally made through the Stock Exchange's designated platform for such communications.

#### **1.2 Insider Trading Regulations**
- **Compliance with SEBI (Prohibition of Insider Trading) Regulations**: Promoters should ensure they are not in possession of any unpublished price-sensitive information (UPSI) regarding the company. Transactions should not be made when in possession of UPSI to avoid violations of insider trading regulations.

#### **1.3 Trading Window**
- **Trading Window Closure**: The trading window, which is the period when the company’s securities can be traded, should be checked. Companies usually close the trading window around the release of financial results or any material announcements. The promoter should ensure their trading activities occur during an open trading window.

#### **1.4 Board Resolution**
- **Board Approval**: Although not always mandatory for individual transactions, it's good practice for the promoter to get a board resolution passed, especially if the transaction is substantial, to avoid conflicts of interest and ensure corporate governance.

### **2. Post-Buying Compliance**

#### **2.1 Disclosure Requirements**

- **Disclosure to Stock Exchanges**:
- **Shareholding Disclosure**: After the acquisition, the promoter must disclose their updated shareholding to the stock exchanges within two working days of the transaction. This is done via the Stock Exchange's platform and is usually in the format of a disclosure of shareholding pattern or a similar document.

- **Regulation 29 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011**:
- **Disclosure**: If the acquisition results in the promoter crossing certain thresholds (e.g., 5%, 10%, etc., of the total shares or voting rights), a detailed disclosure must be made under Regulation 29 to the company and the stock exchanges.

#### **2.2 SEBI Filings**
- **SEBI Compliance**: If the promoter’s acquisition crosses specific thresholds, they must file a detailed report with the Securities and Exchange Board of India (SEBI) as per SEBI regulations.

#### **2.3 Update to ROC**
- **Annual Return**: Any substantial change in shareholding should be reflected in the annual return filed with the Registrar of Companies (ROC) as part of the regular compliance.

#### **2.4 Filing of Form**
- **Form SH-4**: If the acquisition involves the transfer of shares from another individual or entity, Form SH-4 (Share Transfer Form) must be filed with the company, but this is generally more relevant for non-promoter transactions.

### **3. Additional Considerations**

#### **3.1 Market Conditions**
- **Price Sensitivity**: Promoters must be cautious about the timing and price of their transactions to avoid any appearance of market manipulation or insider trading.

#### **3.2 Documentation and Record-Keeping**
- **Record Transactions**: Maintain comprehensive records of all transactions, including purchase details, approvals, disclosures, and communications.

#### **3.3 Compliance with Other Regulations**
- **Company’s Internal Policies**: Adhere to any additional internal policies or codes of conduct adopted by the company regarding share transactions by promoters.

By following these procedures, promoters can ensure that their share acquisition activities comply with regulatory requirements and maintain transparency with the investing public and regulatory authorities.

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