Admission of Security at Depositories

A depository is an organisation which holds securities (like shares, debentures, bonds, government securities, mutual fund units etc.) of investors in electronic form at the request of the investors through a registered Depository Participant.

It acts just like banks, as bank keeps our money in one account, and we avail facility of Debit and Credit similarly depository keep the securities in demat form.

At present two Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) are registered with SEBI.

Obligation to admit securities by Company

According to the Depositories Act, 1996, an investor has the option to hold securities either in physical or electronic form. Part of holding can be in physical form and part in demat form. However, SEBI has notified that settlement of market trades in listed securities should take place only in the demat mode.

Every listed company has to provide facility to their shareholders to maintain demat account with both depository thus every listed company has to admit its securities both with CDSL and NSDL.

From September 30, 2019 in accordance with rule 9 (A) of the Companies (Prospectus and allotment of securities) Rules 2014, every unlisted public company will also have to admit their securities with Depositories.  Further as of now unlisted public company can either admit their security at NSDL or CDSL as per their convenience.

Role of Registrar and Share Transfer Agent (RTA)

A Company willing to admit its securities with Depositories must appoint RTA to manage the share transfer facility.

As per regulation 7 of SEBI (LODR) Regulations 2015 :

The listed entity shall appoint a share transfer agent

or

Manage the share transfer facility in house,

Provided that, in the case of in-house share transfer facility, as and when the total number of holders of securities of the listed entity exceeds one lakh, the listed entity shall either register with the Board as a Category II share transfer agent or appoint Registrar to an issue and share transfer agent registered with the Board.

The listed entity shall ensure that all activities in relation to share transfer facility are maintained either in house or by Registrar to an issue and share transfer agent registered with the Board

Registrar and Transfer Agents are entities registered with the Securities and Exchange Board of India (‘ SEBI’) under the Securities and Exchange Board of India (Registrars to an issue and Share Transfer Agents) Regulations, 1993 and are engaged in providing various Registrar & Transfer Agent ( RTA) related Services’.

Some of the famous RTA are Karvy, Alankit, Skyline etc.

Process for admission of equity and preference shares  at NSDL

  • Companies willing to admit their securities at NSDL are called as issuer.
  • To avail the facility of admission Issuer should first obtain electronic connectivity: It can be obtained with the existing Registrar & Transfer Agent (R&T Agent) or by obtaining In-House connectivity with NSDL.
  • In order to facilitate Issuers to admit their securities, NSDL has created an online platform wherein Issuer itself complete the formalities related to joining the depository system or facilitators can register them self to complete the formalities on behalf of their clients.
  • For accessing the portal, Issuers/facilitators are first requested to register their user details using New User Registration section. Issuers/facilitators who have already registered on Issuer Portal may Login using their existing access/login credential to perform activities related to Issuer admission and Securities admission.
  • Tripartite agreement should be executed between Issuer, R&T Agent and NSDL. The 3 copies of agreement should be sent to NSDL after signing by Issuer & R&T Agent. In case has obtained In-House connectivity with NSDL, bi-partite agreement should be executed between Issuer and NSDL . The 2 copies of agreement should be sent to NSDL after signing by Issuer.
  • Payment of Admission fees to NSDL

Extract of Process Flow as given at NSDL

Process for admission of Equity and Preference Shares at CDSL

  • In order to admit its securities with CDSL, a company should first establish electronic connectivity with CDSL. The company can establish a direct in-house electronic connectivity with CDSL or can utilize the services of a Registrar and Transfer Agent (RTA) having electronic connectivity with CDSL.
  • The company should submit the certified true copy(ies) of the document(s) like Master Creation Form, Board Resolution, MOA,AOA etc.
  • Tri-partite or bi-partite agreement should be executed with CDSL in triplicates with one original and two copies of the original agreement with original signatures and rubber stamp on it.
  • Payment of Admission fees to CDSL

Source: NSDL FAQ/CDSL FAQ/SEBI FAQ

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