Regulation 7 - Grant of certificate of registration - SECURITIES AND EXCHANGE BOARD OF INDIA (DEPOSITORIES AND PARTICIPANTS) REGULATIONS, 1996

Grant of certificate of registration. 7. After considering the application under regulation 3, with reference to the qualifications specified in regulation 6, if the Board is satisfied that the company established by the sponsor is eligible to act as depository, it may grant a certificate of registration in Form B to the depository subject to the following, namely :- (a) the depository shall pay the registration fee specified in Part A of the Second Schedule in the manner specified in Part B thereof, within fifteen days of receipt of intimation from the Board; (b) the depository shall comply with the provisions of the Act, the Depositories 1 [Act], the bye-laws, agreements and these regulations ; (c) the depository shall not carry on any activity other than that of a depository unless the activity is incidental to the activity of the depository: 2 [Provided that a depository may carry out such activity not incidental to its activities as a depository, as may be assigned to the depository by the Central Government or by a regulator in the financial sector, through the establishment of Strategic Business Unit(s) specific to each activity with the prior approval of the Board and subject to such conditions as may be prescribed by the Board, including transfer of such activity to a separate company within such time as may be specified by the Board, having regard to the matters which are relevant to the efficient and orderly function of the Depository as mentioned in regulation 13. Explanation: For the purposes of this clause, a Strategic Business Unit shall be an organizational unit of a company with its own mission, objectives and business strategy that is given the responsibility to serve the particular demands of one business area with appropriate technological, financial and other segregations.] 3 [(cc) the depository complies with the shareholding and governance structure requirements specified in these regulations;] 4 [(d) the sponsor shall, at all times, hold at least fifty-one per cent of the equity share capital of the depository:] 5 [Provided that a recognised stock exchange that is a sponsor of any depository shall not hold more than twenty four per cent. of the paid up equity share capital of that depository: Provided further that any such recognised stock exchange holding more than twenty four per cent. of the paid up equity share capital in a depository as on the date of commencement of the Securities and Exchange Board of India (Depositories and Participants) (Amendment) Regulations, 2012, shall reduce its holding in the depository to twenty four per cent. within a period of three years from the date of such commencement;] (e) no participant shall at any time, hold more than five per cent of the equity capital of the depository; 6 [***] 7 [(ea) no person other than a sponsor, whether resident in India or not, shall at any time, either individually or together with persons acting in concert, hold more than five per cent. of the equity share capital in the depository; Explanation: For the purposes of this clause, - (i) the expression person resident in India shall have the meaning assigned to it in clause (v) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999); (ii) the expression persons acting in concert shall have the meaning derived from clause (e) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997; (eb) 8 [Subject to the limits as otherwise prescribed by the Central Government from time to time,] the combined holding of all persons resident outside India in the equity share capital of the depository shall not exceed, at any time, forty-nine per cent. of its total equity share capital 9 [:] 10 [***] 11 [ Provided that no foreign portfolio investor acquires shares of the depository otherwise than through the secondary market. ] (ec) no foreign 12 [portfolio] investor shall have any representation in the Board of Directors of the depository;] (f) if any information previously submitted by the depository or the sponsor to the Board is found to be false or misleading in any material particular, or if there is any change in such information, the depository shall forthwith inform the Board in writing; (g) the depository shall redress the grievances of the participants and the beneficial owners within thirty days of the date of receipt of any complaint from a participant or a beneficial owner and keep the Board informed about the number and the nature of redressals; (h) the depository shall make an application for commencement of business under regulation 14 within one year from the date of grant of certificate of registration under this regulation; and (i) the depository shall amend its bye-laws from time to time as may be directed by the Board; 13 [(j) any other condition as the Board may deem fit in the interest of securities market.] ************ 1 Substituted for Ordinance by the SEBI (Depositories and Participants) (Amendment) Regulations, 1997, w.e.f. 7-2-1997. 2 Inserted by the SEBI (Depositories and Participants) (Amendment) Regulations, 2007, w.e.f. 10-10-2007. 3 Inserted by the SEBI (Depositories and Participants) (Amendment) Regulations, 2012, w.e.f. 11-9-2012. 4 Substituted by the SEBI (Depositories and Participants) (Amendment) Regulations, 2008, w.e.f. 17-3-2008. Prior to substitution, it read as under: (d) the sponsor shall, at all times, hold at least fifty-one per cent of the equity capital of the depository and the balance of the equity capital of the depository shall be held by its participants; 5 Inserted by the SEBI (Depositories and Participants) (Amendment) Regulations, 2012, w.e.f. 11-9-2012. 6 Omitted, ibid. Prior to omission, the proviso and explanation as amended by the SEBI(Depositories and Participants) (Amendment) Regulations, 1997, w.e.f. 7-2-1997, read as under: Provided that for the purposes of clause (d) and clause (e) no foreign entity individually or collectively either as a sponsor or as a participant or as a sponsor and participant together shall hold more than 20 per cent of the equity capital of a depository. Explanation.-For the purpose of this regulation, a foreign entity shall mean a body corporate or an entity where more than 51 per cent of its equity is held by persons who are not citizens of India; 7 Inserted by the SEBI (Depositories and Participants) (Amendment) Regulations, 2008, w.e.f. 17-3-2008. 8 Inserted by the SEBI (Depositories and Participants) (Second Amendment) Regulations, 2016 , w.e.f. 7-3-2016. 9 Substituted for , subject further to the following: , ibid. Prior to substitution, sub-regulation (eb) as inserted by the SEBI (Depositories and Participants) (Amendment) Regulations, 2008, w.e.f. 17-3-2008, read as under: (eb) the combined holding of all persons resident outside India in the equity share capital of the depository shall not exceed, at any time, forty-nine per cent. of its total equity share capital, subject further to the following:- 10 Omitted by the SEBI (Depositories and Participants) (Second Amendment) Regulations, 2016 , w.e.f. 7-3-2016. Prior to omission, sub-sub-regulations (i) to (iii) of sub-regulation (eb) as inserted by the SEBI (Depositories and Participants) (Amendment) Regulations, 2008, w.e.f. 17-3-2008, read as under: ― (i) the combined holdings of such persons acquired through the foreign direct investment route is not more than twenty six per cent. of the total equity share capital, at any time; (ii) the combined holdings of foreign institutional investors is not more than twenty three per cent. of the total equity share capital, at any time; (iii) no foreign institutional investor acquires shares of the depository otherwise than through the secondary market; 11 Inserted by the SEBI (Depositories and Participants) (Second Amendment) Regulations, 2016 , w.e.f. 7-3-2016. 12 Substituted for portfolio , ibid. 13 Inserted by the SEBI (Depositories and Participants) (Amendment) Regulations, 2012, w.e.f. 11-9-2012