“It is true that promoters in control of the company could use their control to expend company money to buy back shareholders and enjoy the consequential hike in stake. However, should Sebi desire to impose an open offer obligation pursuant to a buy-back, Sebi ought to correspondingly remove the ban on promoters participating in the buy-back.The essence of this approach is to consider whether the promoters have been instrumental in the buy back (through exercise of control) or not.
There is another legislative option. Sebi could make it mandatory that the promoters refrain from voting on buy-back proposals, both at the level of the board decisions and at shareholder meetings, if their stake were to go up beyond 5 per cent. If the rest of the shareholders and the board were to implement the buy-back without the promoters voting, then an involuntary increase of any level of percentage holding of the promoter ought not to result in an open offer.”
It is necessary to note, however, that SEBI has announced amendments to the Takeover Regulations (discussed here and here) since publication of the above column.