SEBI’s New Advertisement Code: Dil Khol Ke Advertise Kar?

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– Prerna Roy | corplaw@vinodkothari.com

Advertisement of products and services is one of the key requirements of any business, including for capital markets intermediaries such as Stock Brokers, OBPPs, Research Analysts, Mutual Funds and Asset Management Companies etc. If a business does not advertise, prospective customers may never become aware of its products and services. At the same time, given the complexity of the products and services offered by these market participants, and the risks it exposes the retail customers to, these advertisement and marketing materials are regulated by SEBI.  In this context, these SEBI-regulated entities are presently being governed by separate advertisement frameworks, resulting in a fragmented regulatory framework and differing compliance requirements. Further, strict compliance requirements attract in the form of prior approval requirements for all communications issued by these entities currently. 

With the objective of promoting ease of doing business, regulatory consistency, consolidation of frameworks while continuing to focus on investor protection, SEBI has issued a consultation paper on the Common Advertisement Code for Specified SEBI-Regulated Entities. Through the proposed Code, SEBI seeks to ease the process of advertising by SEBI-regulated intermediaries by removing prior approval requirements and introducing a common framework, while continuing to maintain accountability, transparency and investor protection.

Read more: SEBI’s New Advertisement Code: Dil Khol Ke Advertise Kar?

Key Proposals 

  1. Permitting Celebrity endorsements 

Presently, the regulatory framework generally prohibits celebrity endorsements by SEBI-regulated entities, except in case of MFs and AMCs, where the same is permitted at the industry level, subject to prior approval from SEBI (Para 11.9.5 of the SEBI Master Circular for Mutual Funds).

The proposed Code seeks to permit celebrity endorsements for all specified SEBI-regulated entities, subject to prior approval from SEBI or the relevant supervisory body. Such approval would be required for celebrity endorsements at the brand/entity level.

The Code identifies the following supervisory bodies for this purpose:

  • Stock Exchanges – Stock Brokers, including Online Bond Platform Providers;
  • Depositories – Depository Participants;
  • Investment Advisers Administration and Supervisory Body (IAASB) – Investment Advisers;
  • Research Analysts Administration and Supervisory Body (RAASB) – Research Analysts;
  • Association of Mutual Funds in India (AMFI) – Mutual Funds and Asset Management Companies; and
  • Association of Portfolio Managers in India (APMI) – Portfolio Managers.
  1. Clarifying the scope of Advertisement 

Presently, there is no distinction between advertisements containing promotional content and general financial literacy content. As a result, even financial literacy content is required to comply with the regulatory framework governing advertisements.

The proposed Code seeks to distinguish between advertisements and non-advertisement communications by providing an illustrative list of communications that would not constitute advertisements. These include, inter alia, reports shared with existing clients, product/service information, regulatory communications, responses to client queries, basic factual information about the regulated entity, and non-promotional product demonstrations.

Thus, no approval/ reporting requirements would apply to communications that are purely educational or investor-awareness oriented and do not contain any promotional content relating to the products or services of a regulated entity, as such communications fall outside the scope of the proposed Code.

  1. Replacing Prior approval requirements by post advertisement reporting

Presently, the regulatory framework requires regulated entities to obtain prior approval from SEBI or the relevant supervisory body before issuing any advertisement. The proposed Code seeks to replace this requirement with a post-advertisement reporting framework, under which advertisements must be reported promptly and, in any event, no later than 24 hours from their issuance to SEBI/ relevant supervisory body.

  1. Permitting Rankings and rating in advertisements 

Presently, there is a complete prohibition on the use of ratings or rankings in advertisements depicting performance.

The proposed Code seeks to permit specified regulated entities to use ratings/rankings in advertisements, provided such ratings/rankings are assigned by a Past Risk and Return Verification Agency (PaRRVA).

Notably, any entity recognised as a PaRRVA shall, in consultation with SEBI and industry bodies, develop a methodology for rating/ranking specified regulated entities. Such ratings/rankings must disclose their methodology, clarify that they are only one factor for investor consideration, and be based on a study or survey covering all relevant market participants to ensure objectivity and comparability.

  1. Prohibition on usage of dark patterns

Presently, none of the existing frameworks expressly prohibit the use of dark patterns, such as false urgency, subscription traps, or forced actions.

The proposed Code seeks to expressly prohibit the use of dark patterns specified in Annexure I to the Guidelines for Prevention and Regulation of Dark Patterns, 2023, issued by the Central Consumer Protection Authority.

Recent amendments issued by the RBI also focus on prohibiting use of dark patterns and mis-selling by RBI regulated entities such as banks and NBFCs. Read our article on the same here

  1. Abbreviated Disclosures for Short-Format Messaging allowed

Presently, mandatory disclosure requirements apply to all forms of advertisements. These disclosures, including disclaimers thereto, are lengthy in nature and take up a lot of space. The proposed Code seeks to relax this requirement for short-format communications such as SMS and push notifications. Where space constraints do not permit inclusion of the prescribed details and disclaimers, a hyperlink to such information on the regulated entity’s official website may be provided. The website, in turn, shall contain the detailed disclosures as required (refer Para 7(4) of the proposed Code). 

Conclusion

This is a significant move by SEBI and is expected to promote ease of doing business while addressing the multiplicity of regulatory frameworks that often leave regulated entities wondering, “kya karen kya na karen, yeh kaisi mushkil haye.” By introducing a common and harmonised advertisement framework, SEBI seeks to bring greater clarity, consistency and regulatory certainty. Overall, the Consultation Paper is a welcome step in the present-day scenario.

Ease of doing business to enhancing oversight: Proposed reforms by IRDAI in the Corporate Agent Regulations

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– Khewan Sonchhatra, Executive | corplaw@vinodkothari.com

Several amendments were introduced to the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999 through the Sabki Bima Sabki Suraksha Act, 2025. These amendments primarily aim to liberalise foreign investment norms, reduce capital requirements, strengthen regulatory oversight of market participants, and enhance measures for the protection of policyholders’ interests[1].

Now, IRDAI has issued a consultation paper proposing amendments to the regulations governing insurance intermediaries. The CP aims at several objectives including  simplifying regulatory requirements, promoting ease of doing business, strengthening accountability and transparency, and enhance policyholder protection.

Key proposals are:

1. Shift from recurring renewals to perpetual registration framework

The following amendments call for substitution of the current framework involving a 3-year renewal exercise by a perpetual registration framework involving payment of an annual fee:

Regulation Existing Provision Proposed Amendment
Regulation 10 – Validity of Registration A Certificate of Registration was valid for a period of three years and required renewal before expiry Registration will remain valid indefinitely, subject to payment of annual fees and unless surrendered, suspended or cancelled by the Authority.
Regulation 11 – Procedure for Issuance of Fresh Certificate to Existing Corporate Agents Regulation 11 dealt with the renewal of registration by Corporate Agents upon expiry of the three-year registration period. Renewal applications were required to be filed before expiry along with the prescribed renewal fee. The entire regulation is substituted. Existing Corporate Agents will now apply for a fresh certificate of registration before expiry of their current certificate and pay the applicable annual fee. Once granted, the fresh certificate will operate under the perpetual registration regime.It means that all the existing corporate agents have to compulsorily apply for fresh registration to get covered under the new perpetual regime.

VKCo comment: Given that existing corporate agents are validly registered, there may not be a need for a provision requiring fresh registration. A simple transitional provision requiring payment of annual fee once the renewal period is over, would have sufficed.
Regulation 12 – Registration not granted The regulation contained references to refusal of registration as well as refusal of renewal of registration. References to “renewal” and “renew” are omitted
Regulation 13 – Effect of Refusal The regulation referred to refusal of registration as well as refusal of renewal of registration. The words “of a renewal thereof” are omitted.
Regulation 4(3)  Application fee Rs. 10000 at the time of application and Rs. 25000 upon  communication of grant of registration by the authorityand  Rs. 25000 for renewal of Registration. Rs. 10000 at the time of applicationand  further payment of annual fee on a yearly basis as per Schedule VI.

2. Simplification of Regulatory Processes and Reduction of Compliance Burden

Regulation 7(3)(c),(d), (e) Formalities relating to specified persons of corporate agents Every Specified Person engaged by a Corporate Agent was required to obtain an IRDAI-issued certificate, valid for 3 years, before soliciting and procuring insurance business. The regulations also prescribed the process for issuance, transfer (switching between Corporate Agents) and migration of such certificates. Clauses (c), (d) and (e) are proposed to be omitted.

These requirements are proposed to be omitted.
Regulation 22(5) – Certificate Number Requirement Corporate Agents shall  disclose details of Specified Persons along with their IRDAI-issued certificate numbers while reporting office and personnel details to the Authority. The words “along with their certificate number issued by the Authority” are omitted.

The amendment removes the requirement to furnish the certificate numbers of Specified Persons to IRDAI, thereby simplifying reporting obligations and reducing procedural compliance

3. Strengthening accountability and oversight of Specified Personnel, Point of Sales Personnel and Authorised Verifier

Regulation 14(v) –  Number of Specified Persons[2] The Corporate Agent was required to solicit and procure a reasonable number of insurance policies commensurate with its resources and the number of Specified Persons employed by it. The requirement was assessed at the entity level Each branch office must employ Specified Persons commensurate with the volume of business handled by that branch, including members enrolled under group policies. Further, every branch must have at least one Specified Person.
Regulation 14(vi) – Policy-wise Tagging of Sales Personnel The existing Regulation requires the Corporate Agent to maintain records in the format specified by IRDAI containing policy-wise and specified person-wise details, wherein every policy solicited by the Corporate Agent is tagged to the concerned Specified Person. The Corporate Agent is also required to provide access to such records to IRDAI. Changes:● Expansion of coverage from only specified person to specified person or POSPs[3].

● Mandatory capture of Aadhar/Pan details of the salesperson.

● Record the salesperson details in the policy document

● Traceability of the individual responsible for the sale
Regulation 14(x) – Periodic Training Requirement (INSERTION) Specified Persons were required to undergo prescribed training before being permitted to solicit insurance business. However, there was no mandatory recurring training requirement after registration. The Principal Officer and Specified Persons must complete at least 25 hours of theoretical and practical training from an approved institution every three years.
Regulation 14(xi) – Power to Impose Business Restrictions(INSERTION) The regulations did not expressly empower IRDAI to impose business-specific conditions, restrictions or limits after grant of registration. IRDAI may, in the interest of policyholders and orderly growth of insurance business, impose conditions, restrictions or limits on the business of a Corporate Agent either at the time of registration or subsequently.
Regulation 19(1) – Professional Indemnity Insurance A newly registered Corporate Agent could be granted up to 12 months from the date of registration to obtain and submit the professional indemnity insurance[4] policy. Every Corporate Agent shall have the professional indemnity insurance policy from its inception.
Regulation 25(4) – Qualification of Authorised Verifiers (INSERTION) The regulations prescribed requirements relating to Authorised Verifiers but did not specifically provide a separate provision requiring a pre-recruitment test and practical training in the manner now proposed A new sub-regulation is inserted requiring Authorised Verifiers to:● Pass a pre-recruitment examination conducted by an examination body nominated by IRDAI; and

● Complete practical training from an IRDAI-approved training institution

4. Enhanced disclosure and transparency requirements

Regulation 17 – Nomenclature of Corporate Agents and Associations The regulations did not mandate the use of the words “Insurance” or “Assurance” in the name of Corporate Agents or their association. Where the principal business of the entity is insurance intermediation as a Corporate Agent, the name must contain the word “Insurance” or “Assurance”. Similar requirements are introduced for associations of Corporate Agents.
Regulation 26(2) – Threshold for Enhanced Reporting  The corporate agent shall be responsible for all the acts and omissions of its principal officer, specified persons and other employees including violation of code of conduct specified under these regulations and liable to a penalty which may extend to one crore rupees under the provisions of Sec. 102 or the Ac The threshold is increased from ₹1 crore to ₹10 crore.
Regulation 31(2) – Disclosure of Insurance Intermediation Revenue Corporate Agents whose principal business was other than insurance intermediation were required to maintain segment-wise reporting capturing revenues from insurance intermediation and other income received from insurers.  Corporate Agents are now required to disclose revenues from insurance intermediation and other income/receipts from insurers through a separate schedule forming part of their financial statements and submit audited financial statements along with the auditor’s report to IRDAI by 30 September every year.
Regulation 31(4) – Disclosure by Large Corporate Agents (INSERTION) The regulations did not specifically require Corporate Agents to disclose commission earned, related party transactions, profits or dividend repatriation based on a commission threshold. A Corporate Agent earning more than ₹10 crore commission in a financial year must annually disclose:● Commission earned;

● Related Party Transactions (RPTs);

● Profits; and

● Dividend repatriated.

These disclosures must be submitted to IRDAI and also published on the Corporate Agent’s website.

VKCo comment: No particular format of the aforesaid disclosures has been provided.
Schedule AA – Undertaking for Foreign-Owned Corporate Agents Required the insurance intermediary to:● Obtain prior IRDAI approval for dividend repatriation;

● Restrict payments to related parties to 10% of total expenses;

● Maintain specified Indian-residency requirements for leadership, directors and KMPs; and

● Bring in technological and managerial expertise.

 Requires the insurance intermediary to:● Submit quarterly details of related party transactions (RPTs) and annual audited financial statements to IRDAI;

● Place such disclosures on its website; and

● Ensure all RPTs are supported by proper agreements, approvals and documentation and comply with applicable laws

5. Introduction of a proportionate annual fee and regulatory supervision framework

Regulation 4(3) Application fee Rs. 10000 at the time of application and Rs. 25000 upon  communication of grant of registration by the authorityand  Rs. 25000 for renewal of Registration. Rs. 10000 at the time of application and  further payment of annual fee as specified within 15 days of the of communication of grant of registration
Schedule V Clause III – Suspension or Cancellation without Notice (INSERTION) The regulations permitted suspension or cancellation of registration in specified circumstances such as fraud, misconduct or other regulatory violations. However, there was no specific provision for suspension solely on account of non-payment of annual fees because the framework was based on registration and renewal. A new provision is inserted under which registration shall be suspended without notice if the Corporate Agent fails to pay the annual fee within the prescribed timeline. The Corporate Agent may seek revocation of suspension by paying the annual fee together with an additional penalty of 10% within three months from the date of suspension.
Schedule VI – Introduction of Annual Fee Framework(INSERTION) Corporate Agents were required to pay registration fees and renewal fees at prescribed intervals under the existing three-year registration framework. A completely new annual fee regime is introduced. Every Corporate Agent must pay an annual fee equal to the higher of:● ₹10,000; or

● 1/25th of 1% (0.04%) of commission and other receipts received from insurers during the preceding financial year.

Late payment attracts penalties and continued non-payment may result in suspension or cancellation of registration.

[1] https://vinodkothari.com/2025/12/major-amendments-in-insurance-act-2025/

[2] Specified Person means an employee of a Corporate Agent who is responsible for soliciting and procuring insurance business on behalf of a corporate agent and shall have fulfilled the requirements of qualification, training and passing of examination as specified in these regulations. A Specified Person is the employee or representative of a Corporate Agent who actually sells insurance policies to customers

[3] Point of Sales Person (POSP) means an individual who has the prescribed qualifications, has completed the required training and examination, and is authorized to solicit and market only those insurance products specified by IRDAI. As defined in reg 14(vi)

[4] Professional Indemnity Insurance (PII) is an insurance policy that protects an intermediary against financial losses arising from errors, omissions, negligence, misrepresentation or professional mistakes committed while rendering professional services.

Policy Updates from SEBI: June Meeting Highlights

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– Abhishek Namdev, Assistant Manager and Srihari G.S., Executive | corplaw@vinodkothari.com

The 19th June board meeting of SEBI witnessed significant decisions for capital markets, including, inter-alia, simplification of the securities transmission framework, reintroduction of open market buy-back through stock exchanges, the GARUDA mechanism for faster processing of AIF placement memoranda, amendments to the SDI Regulations aligning with RBI’s securitisation framework, and changes to the framework governing municipal debt securities, etc. While the changes in the text of respective regulations are awaited, we present our brief understanding of the various approved amendments.

  1. Simplification of transmission of securities (see Consultation Paper here)
  • Quick Transmission Processing (QTP) for small-value claims –
In case of physical holdingsUp to Rs. 10,000
In case of demat holdingsUp to Rs. 30,000
  • Limits for simplified documentation doubled: Rs. 5L to Rs. 10L (physical), Rs. 15L to Rs. 30L (demat).
  • Relaxations pertaining to documentation:
    • Requirement of submission of PAN is removed.
    • The Probate of Will has been done away with.
    • Combined  affidavit-cum-NOC is permitted.
    • A copy of death certificate with QR Code has been introduced as an eligible document.
    • Verification from overseas branches of Indian banks – for death certificates issued in foreign jurisdictions
  • Rationale –  Aimed at reducing cost and procedural hardship for claimants by providing PAN and probate relaxations and alignment with recent succession law amendments.
  1. Re-introduction of Open Market Buy back through Stock Exchanges and Review of the SEBI (Buy- back of Securities) Regulations, 2018 (see detailed write-up here.)
  • Open market buy-back through SE route for buy-back to be effective from August 01, 2026
Before AmendmentAfter Amendment
Tender offer routeTender offer route
Open market route through reverse book buildingOpen market route through reverse book building
NAOpen market  buy -back  through  stock  exchange
  • Dissemination of information about buy-back to be made by way of electronic means in addition to Public announcement through newspaper advertisements.
  • Buy-back through such route be completed within 66 working days from the opening of buy-back with at least 40% of funds earmarked shall be utilized during the first half of buy-back period.
  • It  will  be  treated as  normal  trading transaction(separate trading window is not required).
  • Shares or securities under buy – backremain frozen at ISIN level during buy-back period for promoter(s) or his/their  associates (except for tendering shares in buyback offer).
  • Explicit clarification to comply with minimum public shareholding requirement post buyback           
  • Intervals between two buy-backs aligned as per Companies Act, 2013 (1 year as per proviso to section 68(2)(g)).
  • Appointment of a merchant banker is made discretionary. Accordingly, its activities can be assigned to:
    • Company,
    • Compliance Officer,
    • Statutory Auditor,
    • Secretarial Auditor, and
    • Stock Exchange

Rationale: The aforesaid amendment is driven by the revision in taxation framework, with the objective of offering an additional, flexible buy-back route, reducing procedural complexity, alignment with the Companies Act, 2013 and strengthening investor protection. Discretionary Merchant Banker appointment reduces cost, with duties reallocated to existing compliance/audit functionaries.

  1. Easing entry for AIFs: AIF   Rollout    Upon    Document    Acknowledgement (GARUDA)  Mechanism  for  Processing  of  Placement  Memorandum  of AIFs  filed  with  SEBI (see Consultation Paper here)
  • Timeline for launch of new schemes with SEBI by AIFs has been reduced from 30 days to 10 working days for AIFs
    • For  large value funds, accredited investor (‘AI’) only schemes and Angel Funds, filing of PPM exempt in view of the sophisticated investor class involved.
  1. Aligning issue of Securitised Debt Instruments (SDIs) with RBI Directions on securitisation (see Consultation Paper here)
  • Permitting    single-asset    securitisation    transactions    by    RBI-regulated entities
    • Omitting the condition of single-obligor concentration limit of 25% of the asset pool for RBI-regulated entities
  • Shifting of disclosure and reporting obligations from originator to servicer to align with current marker practice.
  • Trustees associated with  the  RBI-regulated originator to be limited to maximum of 1 representative
    • In other cases, cannot constitute  more  than one-half of the Board of   Trustees  of   the SPDE.
  • Clarification that the prohibition on acquisition of debt/ receivables by SPDE is if:
    • the originator is part of the   same   group   as that  of  the trustee or the originator is under the same control as that of the trustee
  • SEBI to  appoint  a  new  trustee  while  suspending/ cancelling the registration of an old trustee
    • Existing provisions required winding up of schemes of SPDE upon suspension/ cancellation of trustee’s registration
  • Rationale for amendment: To align provisions of SDI Regulations in relation to securitisation transactions originated by Regulated Entities (REs) of RBI with the RBI regulatory framework.
  1. Furthering development of municipal bond market: Amendments  to  SEBI  (Issue  and  Listing  of  Municipal  Debt  Securities) Regulations, 2015 (‘ILMDS Regulations’) (see Consultation Paper here)
  • Permitting municipalities to raise funds for re-financing of existing debt  of  specific  project(s) subject to appropriate disclosures
  • Disclosure requirements and operational aspects specified for raising of funds through a pooled finance vehicle. Clause (l) of Regulation 2(1) contains enabling provisions for raising of funds through such vehicle.
  • Encourage  retail  participation through
    • Permitting Electronic modes  for  making  advertisements  for public issues.
    • Permitting offer incentives in the form of  additional  interest  or   a  discount  to  the issue  price   to  certain categories  of  investors,  namely  senior  citizens, women, serving and retired defence personnel, widows and widowers of defence personnel, retail individual investors.
    • Permitting face value/trading lot for Municipal debt securities issued on private placement basis at Rs. 1 lac or lower value of Rs. 10,000/- with fixed maturity and without any structured obligations
  • Extension in timeline for post-issue listing compliances:
    • submission of quarterly financial results within 60 days from end of FY (previously 45 days) Audit annual financial results within  90 days from end of FY (previously 60 days)
  • Rationale: The amendments are intended to develop the municipal bond market and to encourage retail participation while maintaining appropriate investor protection safeguards.

MoF permits foreign individuals to buy/ sell listed equity

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– Vinita Nair and Saloni Khant | corplaw@vinodkothari.com

With the backdrop of the outflow of billions of foreign funds and the RBI’s multipronged approach to draw foreign funds (Read our article: RBI attempts to woo fleeing foreign investors), RBI notified the FEM (Non-debt Instruments) (Third Amendment) Rules, 2026 effective from June 12, 2026. All foreign individuals who are persons resident outside India PROIs are now permitted to purchase and sell equity instruments[1] of a listed Indian company subject to an individual limit of 10% and aggregate limit of 24%. Corresponding amendments made in FEM (Mode of Payment and Reporting of Non-Debt Instruments) (Amendment) Regulations, 2026 effective from June 13, 2026, which provides the manner of mode of payment and remittance of sale proceeds etc.

Eligibility and permissible limits for investing in equity instruments of listed companies

  • Who can invest?
    • All individual PROI. Earlier it was limited to NRI and OCIs.
  • What are the revised investment limits?
Investment LimitsErstwhile limits (only for NRI and OCI) as other PROI not permitted to investRevised limits for all individual PROI (including NRI and OCI)
Individually5%10%
Aggregate10% (Could be increased to 24% by passing a special resolution)24% (No need to pass a special resolution for increasing the limits )
  • For private sector banks, the limits for NRIs are stricter and remain the same. This may be a gap or a deliberate move to remain aligned with the limit of investments beyond 5% requiring the approval of the RBI under the RBI (Commercial Banks – Acquisition and Holding of Shares or Voting Rights) Directions, 2025. The limits are on both repatriation and non-repatriation basis. For other sectors, investment on non-repatriation basis is permitted without any limits and treated akin to domestic investment.
    • Individual limit –  5 percent of the total paid up capital
    • Aggregate limit –  10 percent of the total paid up capital both
    • NRI holdings shall be allowed up to 24 percent of the total paid up capital both on repatriation and non-repatriation basis subject to passing of a special resolution.     
  • Limit applicable to individuals registered as Cat II FPIs
    • The individual limit stated above is a combined limit for investment made under different schedules.
  • Consequence of breach of individual limit of 10%:
    • Divestment required within 5 trading days of settlement of trade crossing threshold. In case of non divestment, investment is considered to be FDI.
    • Investor to intimate investee company and depositories through AD Cat-1 Bank within 7 trading days of such settlement date.
    • Sale beyond the prescribed period will be treated as contravention of NDI Rules.
  • When is government approval required?
    • Acquisition of control of an Indian investee entity by a citizen/ entity of a country sharing land border with India (LBC investor).
      • Control means the right to appoint the majority of the directors / control the management or policy decisions.
    • Acquisition of ownership of an Indian investee entity by an LBC investor.
      • Ownership means beneficial holding of more than 50% of the equity instrument of such company.
    • Acquisition of beneficial ownership by a citizen of an LBC.

Transfer of Investments in Listed Equity/ Units

  • Who can transfer to whom?
    • All individual PROIs can transfer by sale/ gift to any PROI or may sell on stock exchange.
  •  When is government approval required?
    • In case of sale or gift to another PROI, prior Government approval is required to be obtained for any transfer in case the company is engaged in a sector which requires Government approval.
    • Same 3 scenarios as above, involving LBC investor.

Mode of payment for investment

  • Consideration may be paid by inward remittance from abroad through banking channels or out of funds held in any repatriable deposit account maintained in accordance with the FEMA (Deposit) Regulations,2016 – for e.g. NRE, FCNR (B) or SNRR a/c.
  • A repatriable rupee account maintained in accordance with the FEMA (Deposit) Regulations,2016, required to be designated by an individual PROI to be used exclusively for investments permitted under Schedule III.

Remittance of sale proceeds

  • The sale proceeds (net of taxes) of equity instruments may be remitted outside India or may be credited to the designated rupee account of the person concerned.

Reporting requirements

  • To be done by AD Category-1 Bank to RBI in Form LEC (Individual Foreign Investor – IFI)  for purchase/ sale of listed equity instruments by individual PROIs including NRIs, OCIs. The designated link office of the AD bank shall furnish to RBI, a report on a daily basis, for their entire bank.

[1] Equity instruments comprises equity shares, convertible debentures, preference shares and share warrants issued by an Indian company [Rule 2(k) of FEM (NDI) Rules]

Refer to our other resources:

  1. RBI attempts to woo fleeing foreign investors
  2. Resource Centre on FEMA
  3. Resource Centre on FDI
  4. SOP for FDI approval rationalised for Border- Country Investment
  5. Open but Guarded Gates: Relaxations for Border-Country Investments

Angel Tax on CCPS Issued to Parent Company: ITAT Grants Relief

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– Yuttika Dalmia | finserv@vinodkothari.com

Section 56(2)(viib) of the Income-tax Act, 1961, popularly known as the “Angel Tax” provision, was introduced to prevent the routing of unaccounted money through the issue of shares at a high premium. In an important ruling discussed below, the Delhi ITAT held that this anti-abuse provision should be applied only to transactions that fall within its intended purpose and should not be mechanically invoked in genuine transactions between group companies.

Facts of the case

  • OYO issued CCPS to its holding company Oravel Stays Ltd. following a court-approved demerger of its India hotel business.
  • Oravel’s holding reduced from 100% to 99.6% solely due to the demerger — parent-subsidiary relationship maintained throughout.
  • Shares issued at substantial premium based on DCF valuation report.
  • Capital infused was FEMA-compliant downstream foreign investment.
  • AO alleged shares were issued in excess of FMV and made an addition of ₹3,885.52 crore under Section 56(2)(viib).

Issues Before the Tribunal

  • Whether Section 56(2)(viib) applies to shares issued by a subsidiary to its holding company.
  • Whether AO can reject DCF valuation and substitute NAV method.
  • Whether premium on conversion of CCPS into equity is taxable under Section 56(2)(viib).

AO’s Findings

  • Rejected DCF valuation citing negative net worth, losses and aggressive COVID-era projections.
  • Treated excess consideration over FMV as taxable income under Section 56(2)(viib).

ITAT’s Findings

  • Section 56(2)(viib) being an anti-abuse provision cannot extend to bona fide holding-subsidiary capital infusions absent any money laundering concerns.
  • AO acted beyond jurisdiction by rejecting merchant banker’s DCF report — tax authorities lack expertise to redo such valuations.
  • FEMA-compliant downstream investment cannot be treated as unaccounted money — foundational assumption of Section 56(2)(viib) fails.

Key Takeaways

  • Section 56(2)(viib) must be interpreted purposively — it targets unaccounted money, not genuine intra-group restructurings.
  • AO cannot disregard a registered valuer/merchant banker report without strong and cogent reasons.
  • FEMA compliance creates a strong presumption of genuineness against Angel Tax application.
  • Entire addition of ₹3,885.52 crore deleted by ITAT.

Note: Section 56(2)(viib) of the Income-tax Act, 1961 has been omitted with effect from 1 April 2025 and accordingly is no longer applicable from Assessment Year 2026–27 onwards.

Link to case law: Oyo Hotels And Homes Private … vs Deputy Commissioner Of Income Tax, … on 4 June, 2026

Workshop on Insider Trading Regulations for Compliance Officers

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Workshop on Insider Trading Regulations for Compliance OfficersDownload

See our resources on insider trading here: https://vinodkothari.com/prohibition-of-insider-trading-resource-centre/

“In-laws” in law of Related Party Transactions: Too far, Too much?

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– Sikha Bansal, Senior Partner | corplaw@vinodkothari.com

Related party includes certain relationships solely on account of marriage

  • Definition of “related party” in section 2(76) of the Companies Act, includes “relatives” of directors and KMPs, and goes to include private companies where a director’s or KMP’s relative is a director or member, or firms where the director’s relative is a partner; or even a public company, where the director is a director, and along with his “relatives” holds 2% or more of the share capital.
  • A son-in-law/ daughter-in-law are also “relatives” in section 2(77) of the Companies Act.
  • The provision does not take into account whether there is any financial/economic dependence or influence involved in such relationships and the “in-laws” are considered relatives solely because of the marital relationship.

Practical considerations involved in applying RPT controls to “in-laws”

  • When a wedding in a director’s family happens, a new related party comes into being – son in law or daughter in law. Not only the new RP, but even the companies where the new RP holds directorships or shares becomes a part of the list of “related parties”, linked with a particular director.
  • Obviously, the only way for the company to come to know of this relationship is by way of intimation from the director in question. The director also, particularly in case of economically independent relations such as son-in-law, cannot keep a constant tab on the companies/entities where a son-in-law has directorships or investments.
  • Consequently:
    • A son-in-law may not have intimated or intimated on a real time basis the directorship/private company investments.
    • The director in question would not have come to know of such directorships/investments or would not have come to know of the same on a real time basis.
  • In fact, in most of the cases, a financial independent person who takes care of his/her own economic interests would not want to disclose or divulge personal and financial details to anyone.
  • Therefore, it is not feasible to envisage a real time updation of familial relationships, or the economic interests of such relationships of a director in question
    • Hence, information time lags are quite natural.
  • The concerns as discussed above become more prominent where the concerned director is that of a subsidiary. In that case, the information has to flow through several layers, creating more barriers.

Accounting standards rely on the element of “influence”

  • AS-18 definition of “relative” is as follows:

“10.9 Relative – in relation to an individual, means the spouse, son, daughter, brother, sister, father and mother who may be expected to influence, or be influenced by, that individual in his/her dealings with the reporting enterprise.”

  • IndAS 24 does not use the terminology “relative”, but uses the expression “close members of the family” and the same is defined as follows:

“Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity including: (a) that person’s children, spouse or domestic partner, brother, sister, father and mother; (b) children of that person’s spouse or domestic partner; and (c) dependants of that person or that person’s spouse or domestic partner.”

  • Definition of “relative” under AS-18 is clear – a person (including even father, mother, etc.) would be considered a “relative” when there is an element of influence (or expectation thereof) between the individual (that is, the director) and that person. Such an element is often deemed to exist when there is a financial dependence involved, or when families are staying together.
  • Similarly, the definition of “close members” in Ind AS 24 also hinges on “expected to influence” or “influenced by”. The inclusive part only includes children, spouse, siblings, or the person’s “dependents” – and not all relatives (not even spouses of the children).

Scope of ‘relative” under insider trading laws

  • Insider trading laws ought to be and are seen as strict as RPT laws – as both these laws deal with abuse of position and conflict of interest.
  • Notably, Prohibition of Insider Trading Regulations define “immediate relative”to mean a spouse of a person, and includes parent, sibling, and child of such person or of the spouse, any of whom is either dependent financially on such person, or consults such person in taking decisions relating to trading in securities.
  • Therefore, even in case of insider trading laws, only the spouse is always seen as an immediate relative, irrespective of the element of financial dependence or decision-making element. All other relationships are taken into account only when the elements of financial dependence or decision-making are present.

Whether the company or the director can be held at fault?

  • RPT controls for companies are driven by conflicts of interests coming to play on transactions.
  • As explained above, if there are information gaps, and neither the director nor the company could know the economic interests of the “in-laws”; and the company ends up transacting with such person;  it cannot be contended that the transaction was inspired by the relationship (because, the company, at the first place, did not know it was transacting with a related party). In fact, in such cases, the chances of conflict of interest or abuse of position would be minimised.
  • At the same time, it is important to ensure that a director does not misuse the “information gap” to his advantage, and can continue to push transactions with an interested party while not fulfilling the obligation of providing timely information to the company.

Possible solution

  • Hence, a possible solution is:
    • List of relatives, including entities where such relatives hold economic interest (as per the requirements of the Companies Act/Accounting Standards), should be updated by companies frequently – say, every quarter, instead of annually.
    • The director of the company/subsidiary company must intimate the information immediately as it is received, to the holding company/subsidiary company (as the case may be); and in turn, the subsidiary company (in applicable cases) should pass on the information immediately to the holding company (as transactions with related parties of subsidiaries are RPTs for the holding company as well).
  • Transactions which could have been entered into by the company with the said “relative” (or concerned entity) without the knowledge of the company that such person was, in fact, an RP, should be placed before the audit committee for information purposes when the list of RPs is updated as per agreed frequency.
    • In our view, in such cases, the transactions should be considered as RPTs only from the time the relationship comes to the knowledge of the company.
    • Given the above, there should be no question of any “ratification” of such transactions. Although, it might be important for the audit committee to be aware of such transactions for decision-making purposes.
    • In case of delays on the part of directors/ subsidiary companies, the audit committee should appropriately give its adverse observations to the director/ subsidiary.
  • And, for all proposed transactions in future, the company should take prior approval from the audit committee.
  • The transactions would be disclosed to the stock exchange u/r 23(9) accordingly.

Possible approach towards law and policy making

  • Law cannot remain divorced from ground realities. Several reports suggest that India has moved on from the concept of joint families, and nuclear families now constitute more than 50% of the Indian households (which is basically – the individual, the spouse and the kids). That does not even include brothers and sisters.
  • In such cases, to assume that sans any financial dependence or any influence in decision-making, a mere establishment of a marital relationship might lead to a position of “conflict of interest” would be quite impractical or even irrational.
  • Therefore, there might be a need to align the law with practical considerations and difficulties involved so as to facilitate due compliance without stressing on outdated or impractical formalities.

Refer to our other resources:

  1. RPTs: Do extreme comparables distort arm’s length?
  2. RPTs: Testing Multiyear Contracts for Materiality
  3. Related Party Transactions- Resource Centre

RBI attempts to woo fleeing foreign investors

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– Vinita Nair and Saloni Khant | corplaw@vinodkothari.com

– Updated as on June 20, 2026.

In light of the outflow of $13.7 billion by foreign institutional investors in less than 2 months and the consequent fall in rupee, the RBI governor has issued a press release dated June 5, 2026 introducing various measures to pull in foreign capital such as slashing tax on investment in G-secs, removing restrictions thereon, enabling foreign investment in G-secs with longer tenure, raising investment limits for NRI, OCIs and PROIs in listed equity, concessional forex swap for ECB by PSUs and subsidising hedging cost for FCNR (B) deposits.

Government Securities

  • FPIs, OCIs, and NRIs permitted to invest in 15, 30 and 40 year G-secs under FAR
  • Ease of investment in G-Secs for FPIs under the General Route
    • FPIs can now invest under the general route in government securities without these restrictions w.r.t. Short-term investments limits, Security-wise limit and Concentration limits:
      • Short-term investments limit: Investment in G-secs (maturity up to 1 year) were capped at 30% of the FPI’s total investment in each category.
      • Security-wise limit: Total of investments by FPI and those made through the Special Rupee Vostro Account Route in CG securities were capped at 30% of the security’s outstanding stock.
      • Concentration limit: Investment in G-secs by an FPI (with related FPIs) was capped at 15% and 10% of the prevailing investment limit of long-term and other FPIs respectively.
  • Merging of ‘general’ and ‘long-term’ investment limits by FPI in G-secs

The limits of investment by FPIs in G-Secs, previously bifurcated in ‘general’ and ‘long-term’ investments have now been merged for better flexibility. The erstwhile limits are provided in RBI Circular dated April 6, 2026, now clubbed as:

  • No capital gains tax for foreign investments in G-secs

An ordinance dated June 5, 2026 exempts interest earned as well as capital gains on transfer, sale or exchange of G-secs held by Foreign Institutional Investor or a Bank for International Settlements w.e.f. April 1, 2026.         

These measures are expected to increase returns for FPIs from Indian G-Secs by 15-20%[1].

Listed Equity Investments

ECBs by PSU and OFCBs

  • Government provides concessional forex swap for ECB by PSUs and OFCBs
    • The inherent currency risk of ECBs is hedged using forex swaps. The cost of forex swaps often wipes out the advantage of foreign borrowings. This relief expects an increase in ECBs from the usual $10–12 billion to $15 billion.[2]
    • The framework was notified vide RBI circular dated June 8, 2026.
    • Applicability of swap facility:
      • For ECBs with minimum maturity of 3 years;
      • For undrawn portion of existing ECBs;
      • Not available for ECBs with embedded options or raised for refinancing / repayment of existing ECBs;
      • OFCBs[3] raised by AD Cat-I Banks with minimum maturity of 3 years.
    • Features of swap facility:
      • Facility for ECBs drawdown/ OFCB flows received from June 8 to December 31, 2026 and remains open till January 15, 2027;
      • Facility available in USD only for ECB raised in any currency;
      • Maximum tenure of swap as per maturity schedule of ECB/ OCFB upto maximum 5 years;
      • Swap available at a fixed rate of 1.5 per cent per annum compounded semi-annually; 

FCNR Deposits

  • Government to bear full hedging cost of AD Cat-I Banks for fresh FCNR (B) deposits till September 30, 2026
    • Fresh 3 to 5 year Foreign Currency Non-Resident (Bank) Deposits made by NRIs and PIOs will benefit from this move. Banks may be able to raise up to $40 billion.[4]
    • The RBI Circular dated June 8, 2026 makes the framework immediately effective:
      • Facility for deposits mobilised from June 8 to September 30, 2026 and remains open till October 16, 2026;
      • Banks free to price deposits but overall ceiling as per the RBI’s guidelines. W.e.f. June 17, 2026 to September 30, 2026, RBI withdraws interest rate ceiling on these deposits (previously Overnight Alternative Reference Rate for the respective currency/ Swap plus 350 basis points) including those renewed on maturity. The rationale is to empower banks to pass the benefits of the swap facility to the depositors.
      • Tenor of swap in line with tenor of deposit;
      • Minimum lock-in period of 1 year for deposits, thereafter as per Bank’s policy;
      • Swaps once availed cannot be cancelled;
      • Facility available only once a week for FCNR(B) deposits mobilised in USD in previous week and pending to be covered under facility;
      • Swap facility available in US Dollars only.
  • RBI exempts[5] such FCNR (B) Deposits from CRR and SLR requirements from June 8 to September 30, 2026.
  • Additionally, RBI announced a similar withdrawal w.e.f. June 17, 2026 to September 30, 2026 for ceilings on interest rates for Rupee Deposits of Non-Residents i.e. NRE deposits with a tenor of at least 3 years including deposits renewed on maturity.         

RBI provides liberty to exclude the swap positions under the above facilities related to FCNR (B) deposits, ECBs and OFCBs from the limit of USD 100 million under RBI Circular dated March 27, 2026. Refer to RBI’s FAQs on the swap facilities here.

Reporting of ECBs, OFCBs and FNCR Deposits

  • W.e.f. June 22, 2026, AD Cat-I Banks to report data for ECBs, FCNR Deposits and OFCBs covered under RBI’s swap facility.
  • Reporting to be done on a daily basis by 6 pm.
  • For first reporting on June 22, 2026, data from June 8, 2026 till June 19, 2026 to be submitted.

Realization of export proceeds

  • Timeline for realisation of export proceeds restored back to 9 months from 15 months

On November 13, 2025, the FEM (Export of Goods and Services) Directions were amended to increase the timeline for realisation of export proceeds including those made by specified entities such as SEZ / status holder exporter / EOUs etc. from 9 to 15 months as an EODB measure. [See the brief highlights here.] The latest amendment aims to expedite export receipts.

[1] Source: https://www.thehindubusinessline.com/money-and-banking/govt-sops-to-boost-fpi-returns-from-gsec-by-15-20/article71065897.ece

[2] Source: https://www.business-standard.com/economy/news/psu-ecb-borrowings-may-cross-15-billion-on-rbi-s-concessional-swap-window-126060700598_1.html

[3] Overseas Foreign Currency Borrowings

[4] Source: https://economictimes.indiatimes.com/industry/banking/finance/banking/banks-to-be-told-to-step-up-fcnr-b-deposits/articleshow/131573654.cms?from=mdr#:~:text=Banks%20will%20now%20encourage%20more,attract%20significant%20foreign%20currency%20inflows. 

[5] Hyperlinked to amendment to Directions for Commercial Banks. Similar amendments to CRR and SLR Directions for Regional Rural Banks, Rural Co-operative Banks, Urban Co-operative Banks and Small Finance Banks.

[6] previously Overnight Alternative Reference Rate for the respective currency/ Swap plus 350 basis points

Refer to our other resources:

  1. Resource Centre on FEMA
  2. Resource Centre on ECB
  3. SOP for FDI approval rationalised for Border- Country Investment
  4. Open but Guarded Gates: Relaxations for Border-Country Investments

CSR through ZCZP Bonds: MCA unveils new route for social finance

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– Payal Agarwal and Sourish Kundu | corplaw@vinodkothari.com

Since its inception in 2019, proposals were in discussion for bringing an alignment between the new brought noble concept of Social Stock Exchanges (“SSEs”) with the existing, well-recognised statutorily-laid social obligations on companies, viz., Corporate Social Responsibility (CSR) under the Companies Act. However, the concept of SSE and NPOs listed thereunder, introduced in 2022, continued to remain severed from the very mandated provision of social spending under Section 135, until now, since the proposal required sanction of the MCA. 

The MCA, vide Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026 (“Amendment Rules”) on May 27, 2026, has introduced an enabling framework permitting  subscription to Zero Coupon Zero Principal Instruments (“ZCZPIs”), that is, the instruments issued by eligible Not-for-Profit Organisations (“NPOs”) listed on SSEs as an eligible means of fulfilling CSR spending obligations. 

Understanding Zero Coupon Zero Principal Instruments 

NPOs registered on SSEs are permitted to raise funds exclusively through issuance of ZCZPIs . These are essentially donations in the form of securities (ZCZPI is recognised as a security under SCRA). As the name suggests, ZCZPIs  will never repay back the principal, or pay any interest, either during or at the end of the tenure of the instrument. These are responsible donations in the sense that the NPO raising funds through ZCZPIs on the SSE is required  to comply with stricter norms and disclosure requirements.  [Read more here]

CSR through ZCZPIs: things to know

The Amendment Rules refer to various conditions and relaxations w.r.t. CSR through subscription to ZCZPIs: 

  1. A maximum cap of 10% of an entity’s total CSR obligation during a year, has been specified for undertaking CSR through ZCZP Bonds. 
  2. Exemption from undertaking impact assessment of the projects being funded through such issuance. 
  3. Further, exemption has been granted to the management of a company investing in ZCZP Bonds, to satisfy itself of the appropriate utilisation of the amount disbursed, and certification by CFO in that regard, in addition to the requirement of continuous monitoring of ongoing projects. 

This may be based on the rationale that Regulation 91F of the Listing Regulations already mandates a statement of utilization of funds to be submitted to SSEs, by the NPOs on a quarterly basis within 45 days from the end of a quarter, hence the purpose of monitoring and assessment is already satisfied. 

  1. Further, not all ZCZPIs are eligible CSR expenditure. A ZCZPI would be considered eligible for CSR purpose, only if the following conditions are satisfied:
    • the duration of the project undertaken through the instrument should not exceed 3 succeeding FYs from the date of issuance of the ZCZP Bonds; and
    • upon termination of listing of the ZCZP Bonds, any unspent amount is required to be transferred to a fund specified under Schedule VII to the Act, with a compliance report thereof to be submitted to SEBI. 

The conditions are, thus, similar to those applicable to ongoing projects under CSR. 

Conclusion

The regulators have been making continuous efforts towards making the SSE concept in India a success. While there are registered NPOs on the SSE, in order to boost issuance of ZCZPIs, SEBI has made it mandatory for registered NPOs to bring listed ZCZPIs within a maximum of 2 years from registration on SSEs. The Amendment Rules mark an interesting development pursuant to SEBI’s recommendation to the Ministry of Finance for recognition of ZCZPIs  within the CSR framework, thus attempting to build a demand for the ZCZPIs. 

While the move is clearly intended to create greater synergy between the CSR ecosystem and the SSE framework, its practical effectiveness remains to be seen. 

This becomes particularly relevant considering that, since 2022, the quantum of funds mobilised by NPOs via SSE is significantly lower than the CSR spending during the same period. The true impact of the amendment would therefore depend on whether the recognition of ZCZP Bonds as an eligible CSR avenue is able to meaningfully channel corporate CSR capital towards the SSE ecosystem and improve participation therein.

Read more: 

Social stock exchanges: philanthropy on the bourses

Social Stock Exchanges – Enabling funding for social enterprises the regulated way

FAQs on Social Stock Exchange

SEBI proposes revival of open market buy-backs through stock exchange 

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– Abhishek Kumar Namdev, Assistant Manager | corplaw@vinodkothari.com 

Introduction

Open-market buyback through stock exchanges, earlier discontinued by SEBI in a phased manner based on a 2023 amendment (see an article here), is proposed to be brought back in the buy-back regime. SEBI has released two consultation papers, on April 02, 2026 and May, 08, 2026 proposing to re-introduce open market buy-back of shares through stock exchanges. 

Buyback through the SE route would usually be preferred for the ease of compliances and flexibility available with the listed entity. The process is rather simple and cost-effective, as compared to the lengthy process of tender offer or reverse book-building. 

Reasons for phasing out this method in 2023? 

Historically, buy-back through the stock exchange route was one of the recognized modes under the regulations, which was subsequently phased out pursuant to the 2023 amendments and discontinued w.e.f April 01, 2025. Reasons involved: 

  1. Tax inequalities: Under the old taxation system companies were required to pay the buy-back tax under Section 115QA of the Income tax Act, 1961. Shareholders participating in the buy-back were not under any obligation to pay any tax on capital gains. This resulted in the shareholders availing a tax-free exit, while effectively, such tax burden was put on the remaining shareholders, through taxing the company that bought back the shares. 
  1. Inequitable shareholder participation: The price-time order matching system meant that only a few shareholders could end up selling their entire shareholding by participating in the buy back, while others despite willingness may be excluded, making the process chance-based rather than offering equitable participation.
  1. Artificial demand: In addition to the issues of participation inequality and tax inequalities, the lengthy time frame of buy-back via the stock market route also generated fears of price manipulation as well as price distortions since continuous purchase by the company would have an impact on the market prices over time.

Reverting back to the SE route: what changed? 

The primary rationale for bringing back buybacks through SE route is on account of the tax inefficiencies being resolved pursuant to the Finance Act, 2026.  The taxation of buy-back proceeds has been rationalised, putting the tax burden on those shareholders whose shares are being bought back. 

Additionally, to ensure that there is no misuse of the buyback provisions by the promoters or promoter group members, the new taxation regime imposes additional tax-rates on buyback by such shareholders. See an article on the changes in relation to  buy-back taxation.

On the other hand, open-market buyback through the SE route is also recognized for enabling efficient price discovery, improved liquidity, and flexible capital management for companies. Thus, the balance is in favour of enabling buybacks through the SE route again. 

Is it a revert or a new framework? 

The proposal is neither a “revert”, nor a completely new framework. See figure below for proposed changes in the process of buyback through SE route: 

The 8th May CP proposes certain modifications to the erstwhile provisions of the Buyback Regulations for ease of doing business and further strengthening the buyback framework, as tabulated below: 

ProvisionExtant requirementsProposed changes Remarks
Public announcement (Reg. 16(iv)(b)Newspaper publication within 2 working days of board/postal ballot resolution;also placed on the website of SE, merchant banker  and company Additional mandatory electronic intimation (including email communication) to shareholders as on the date of public announcement, within one working day from the date of such public announcement. To ensure due information to shareholders in a timely manner. 
Duration (Reg. 17(ii))6 months – prior to 2023 amendment Reduced to 66 and thereafter 22 working days pursuant to 2023 amendments66 working days 

To ensure timely execution while providing adequate flexibility to the issuers 
Separate Trading Window (Explanation to reg. 16)Through a separate trading window provided by the stock exchange.To be done under the normal trading window A separate trading window is not required in view of the uniformity in tax treatment. Accordingly, this is not required. 
Disclosure of Company Identity in Buy-back Orders (Reg. 17)The company’s identity as purchaser was required to be displayed on the electronic screen at the time of placing the order. NA 

Proposals applicable to all forms of buyback 

While the CP is primarily focussed on bringing back SE mechanism for buybacks, some proposals have been made for amendments in the existing regulations w.r.t. all forms of buyback: 

ProvisionExtant requirementsProposed changes Remarks
Prohibition on trading by promoters and associates (Reg. 24(i)(e)From buyback approval till offer closure – prohibition on promoters and their associates, including inter-se transfersPromoters’ shareholding to remain frozen at an ISIN level during the buy-back period,
Exception: for tendering shares in a tender offer buy-back		Freezing of PAN at an ISIN level provides an additional safeguard against use of buyback by promoters for market manipulation. 
Tendering of shares during tender offer is permitted, in view of the additional tax-rates imposed on promoters pursuant to the Finance Act.  
Minimum public shareholding complianceNo explicit provisions Buyback not to be announced in breach of MPS requirementsThis is a clarificatory change; even though the Regulations did not explicitly mention about MPS requirements, the issuer is required to ensure compliance will all applicable laws at  all times.
Interval between two Buy-Back offers (Reg. 4(vii))Lock-in of 1 year from expiry of the buy-back period Reference to CA, 2013 instead of explicit provisionsThe CLAB, 2026 proposes various amendments in relation to the buyback framework; this will ensure alignment between the SEBI Regulations and CA, 2013. See an article here. 
Appointment of Merchant Banker (“MB”)Mandatory Functions of merchant banker to be re-distributed to LE, SEs and Secretarial auditor.For reducing the procedural and compliance costs

Our Remarks

Overall, the proposal reflects a shift from prohibition to reinstatement of an earlier permitted mechanism of buyback through the SE route, with additional safeguards to ensure there are no regulatory loopholes. With changes proposed in CA, 2013 under the Corporate Laws Amendment Bill, and a favourable tax regime pursuant to the Finance Act, 2026,  this seems to be an opportune time to revisit and revise the buyback framework applicable to the listed entities. 

The rebirth of buyback through SE mechanism is expected to  provide companies with greater flexibility in structuring buy-backs, while also ensuring a more equitable framework for shareholder participation and taxation outcomes. The proposal, therefore, seeks to strike a balanced approach between market efficiency and fairness, addressing past issues without dispensing with the benefits of the mechanism.