Reconciliation of Share Capital Audit
Every Company whose securities are listed on any stock exchange in India is to mandatorily admit their securities with Depository. Depository is basically a facilitator for holding of securities in the dematerialized form and an enabler for securities transactions.
In India there are two depositories (National Securities Depository Limited i.e. NSDL and Central Depository Services Limited i.e. CDSL) and Companies must provide facility to its shareholder to keep their shares either with NSDL or CDSL.
For example, ABC LTD is a listed Company whose 20,00,000 shares are listed on Bombay Stock Exchange. Now shareholders have option to either keep their shares in demat with NSDL or with CDSL. Therefore, some of the shareholders of ABC Ltd might be having account with CDSL and some with NSDL. It is also possible that few shares of the Company remain in physical mode.
To keep a tab on shares of listed Company, Securities and Exchange Board of India has prescribed some regulations.
Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018.
Regulation 76 of Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 covers the Audit of Share Capital.
Regulation 76(1) states as below:
Every issuer i.e. Listed Company shall submit audit report, known as Share Reconciliation Audit Report, on a quarterly basis, starting from September 30,2003, to the concerned stock exchanges audited by a qualified Chartered Accountant or a practicing Company Secretary and submit a share reconciliation certificate, for the purposes of reconciliation of the total issued capital, listed capital and capital held by depositories in dematerialized form, the details of changes in share capital during the quarter and the in-principle approval obtained by the issuer from all the stock exchanges where it is listed in respect of such further issued capital.
Regulation 76(2) states as below:
The audit report under sub-regulation (1) shall also give the updated status of the register of members of the issuer and confirm that securities have been dematerialized as per requests within twenty one days from the date of receipt of requests by the issuer and where the dematerialization has not been effected within the said stipulated period, the report shall disclose the reasons for such delay.
Regulation 76(3) states as below:
Every issuer or its agent shall establish continuous electronic means of communication with the depository with which it has entered into an agreement.
To summaries above:
- Every Listed Company shall submit a quarterly report on its share capital.
- Report will confirm the no. of shares held in CDSL, NSDL and Physical form.
- This Certificate is to be submitted by a qualified Chartered Accountant or a practicing Company Secretary.
- Report shall be submitted within 30 days from the end of quarter.
- Report shall mention details of changes in share capital during the quarter under consideration
- It should confirm whether Register of Member is updated or not.
Recently Ministry of Corporate Affairs has inserted a new rule , Rule 9A of The Companies (Prospectus and Allotment of Securities) Rules, 2014 which states that all unlisted public companies must Issue of securities in dematerialised form and Facilitate dematerialisation of all its existing securities.
Rule 9A(4) states that Every unlisted public company shall facilitate dematerialisation of all its existing securities by making necessary application to a depository as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 and shall secure International security Identification Number (ISIN) for each type of security and shall in-form all its existing security holders about such facility.
After incorporation of this rule in Companies Act, 2013 now unlisted public are also required to admit their securities with Depository.
Further Rule 9A (8) states 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.
In view of the abovementioned sub rule Unlisted Companies are also required submit audit report on share reconciliation as submitted by listed companies.
Thus Reconciliation on share capital is required to be submitted as below:
|Listed Companies||Within 30 days from end of quarter|
|Unlisted Public Companies||Within 60 days from end of half year|