ISSUE OF SECURITIES IN DEMATERIALIZED FORM BY UNLISTED PUBLIC COMPANIES

[Mr. M. GOVINDARAJAN]

New Rule for unlisted public company

A new Rule 9A was inserted vide Notification No. G.S.R. 853 (E), 10.09.2018.  This Rule came into effect from 02.10.2018.

Rule 9A(1) provides that every unlisted public company shall –

•  issue the securities only in dematerialized form; and
• facilitate dematerialization of all its existing securities

in accordance with provisions of the Depositories Act, 1996 and regulations made there under.

Non applicability of this Rule

This rule is not applicable in the following unlisted companies with effect t from 22.01.2019-

• a Nidhi;
• a Government company or
• a wholly owned subsidiary.

Dematerialization of shares

Every unlisted public company making any offer for-

• issue of any securities or
•  buyback of securities or
• issue of bonus shares or
•  rights offer

shall ensure that before making such offer, entire holding of securities of its promoters, directors, key managerial personnel has been dematerialized in accordance with provisions of the Depositories Act, 1996 and regulations made there under.

Transfer of securities

Every holder of securities of an unlisted public company,-

• who intends to transfer such securities on or after 2nd October, 2018, shall get such securities dematerialised before the transfer; or
• who subscribes to any securities of an unlisted public company (whether by way of private placement or bonus shares or rights offer) on or after 2nd October, 2018 shall ensure that all his existing securities are held in dematerialized form before such subscription.

International Security Identification Number

Every unlisted public company shall facilitate dematerialization of all its existing securities by making necessary application to a depository as defined in  section 2(1)(e) of the Depositories Act, 1996 and shall secure International Security Identification Number (ISIN) for each type of security and shall inform all its existing security holders about such facility.

Obligations of unlisted private company

 Every unlisted public company shall ensure that –

•  it makes timely payment of fees (admission as well as annual) to the depository and registrar to an issue and share transfer agent in accordance with the agreement executed between the parties;
• it maintains security deposit, at all times, of not less than two years' fees with the depository and registrar to an issue and share transfer agent, in such form as may be agreed between the parties; and
•   it complies with the regulations or directions or guidelines or circulars, if any, issued by the Securities and Exchange Board or Depository from time to time with respect to dematerialization of shares of unlisted public companies and matters incidental or related thereto.

Default

No unlisted public company which has defaulted to comply with its obligations shall make offer of any securities or buyback its securities or issue any bonus or right shares till the payments to depositories or registrar to an issue and share transfer agent are made.

Reconciliation of share capital

Rule 9A (8) has been substituted by a new sub-rule (8) and (8A) vide notification no. GSR 376E, dated 22.05.2019.  The new rules will come into effect from 30.09.2019.

The newly substituted Rule 8 provides that every unlisted public company governed by this rule shall submit Form PAS-6 to the Registrar with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 within sixty days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice.  For example the form PAS – 6 for the first half year of 2019-20 is to be filed within 29.11.2019, i.e., within 60 days from the conclusion of first half year on 30.09.2019.

Rule 8A provides that the Company shall immediately bring to the notice of the depositories any difference observed in its issued capital and the capital held in dematerialized form.

All information shall be furnished for the half year ended 30^th September and 31^st March in every financial year for each ISIN separately.  The following information is to be furnished in Form PAS 6-

1. CIN of the company;
2. Name of the company; address of its registered office; email id and phone number;
3. ISIN
4. Period of filing-  From______To_______
5. Details of the capital of the company-

1. Issued capital – no. of shares and %age of total issued capital;
2. Held in dematerialized form in CDSL – no. of shares and %age of total issued capital;
3. Held in dematerialized form in NSDL – no. of shares and %age of total issued capital;
4. Held in physical form – no. of shares and %age of total issued capital;
5. Total no. of shares [b+c+d] - no. of shares and %age of total issued capital;

6. Reasons for difference between 5(a) and 5(e)
7. The details of changes in the share capital during the half year under consideration in respect of-

• Rights issue;
• Bonus issue;
• Private placement;
• ESOPs;
• Amalgamation;
• Conversion;
• Buy back;
• Capital reduction;
• Forfeiture;
• Any other.

The changes effected in number of shares in above categories are to be indicated in the form.  Whether such changes are intimated to CDSL/NSDL is to be indicated.

8. Details of shares held by-

• Promoters;
• Directors; and
• Key managerial personnel

in demat form, in physical form and total of both the types.

9. Whether the Register of Members has been updated; if not updated the date upto which the said register has been updated;
10. Whether there were dematerialized shares in excess in the previous half yearly period?
11. Whether the company resolved the problem of excess dematerialized shares in the previous financial year? If not the reasons for the same are to be indicated.
12. The total number of demat requests, if any confirmed after 21 days and the total number of demat requests pending beyond 21 days with the reason for the delay are to be mentioned in this form.
13. Details of the Company Secretary of the company, if any;
14. Details of practicing Company Secretary/Chartered Accountant who is to certify this form.
15. If any common agency is appointed for share registry work the name of the said agency and its address is to be mentioned.
16. Any other detail that the professional signing this form may like to provide.
17. Verification by the Director who signs the form digitally.
18. Certificate by the practicing Company Secretary/Chartered Accountant.

Applicability of Acts/Regulations

Except as provided in sub-rule (8), the provisions of-

• the Depositories Act, 1996,
• the Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018; and
•  the Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993

shall apply mutatis mutandis to dematerialization of securities of unlisted public companies.

Grievances of security holders

The grievances, if any, of security holders of unlisted public companies under this rule shall be filed before the Investor Education and Protection Fund Authority.   The Investor Education and Protection Fund Authority shall initiate any action against a depository or participant or registrar to an issue and share transfer agent after prior consultation with the Securities and Exchange Board of India