Share Admission Service: Your Path to Digital Securities
Make your securities digital and navigate the financial world with ease with our share admission services
Overview
In India the “admission of securities in a depository” denotes the electronic deposit of financial securities, encompassing shares, bonds, and other instruments, into a depository system. This is the responsibility of the Central Depository Services Limited (CDSL) and the National Securities Depository Limited (NSDL), two significant depositories in India. The main goal of this is to transform tangible securities into digital or dematerialized form, which facilitates ownership, trading, and settlement.
The Companies (Prospectus and Allotment of Securities) Rules, 2014 states that every unlisted public company shallissue the securities only in dematerialised form and facilitate dematerialisation of all its existing securities.
Earlier this provision was mandatory for listed companies only. However, after the amendments in the Companies (Prospectus and Allotment of Securities) Rules, 2014 every unlisted public company is now required to facilitate dematerialisation of all its existing securities by making necessary application to a depository.
However, Nidhi Company, Government Company and wholly owned subsidiaries are exempted from this rule.
Further, Ministry of Corporate Affairs, by its notification issued on 27th October, 2023 amended Companies (Prospectus and Allotment) Rules, 2014 and mandated the dematerialization of shares of Private Company, other than small company on or before 30th September, 2024. As per this notification all the Private Companies which as on the last day of financial year ending on 31st March, 2023 is not a small company, as per audited financial statements, shall within 18 months from the closure of the financial year facilitate dematerialization of its securities.
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.
At present two Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) are registered with SEBI.
A Company willing to admit its securities with Depositories must appoint Registrar and Transfer Agent (RTA) to manage the share transfer facility.
Benefits
- Dematerialization: Physical securities must normally be dematerialized in order to be admitted to a depository. Digital or electronic forms are created from physical share certificates. This removes the risk involved in handling and maintaining real certificates, making it more convenient for investors.
- Ownership in Electronic Form: Ownership of securities is electronically recorded when they are accepted into a depository. In their electronic database, the depository keeps track of ownership of shares, bonds and other instruments. Compared to paper certificates, this electronic record is rather effective and secure and cost efficient.
- Paperwork Reduction: Businesses and investors experience a significant reduction in paperwork when securities are admitted to a depository. Physical certifications might be difficult to handle and transfer, and doing so takes time.
- Security and Safety: Securities’ confidentiality and protection are improved by the electronic format. The possibility of physical certificates being stolen, misplaced, or damaged is eliminated.
- Corporate Actions: With computerized means, companies may effortlessly oversee corporate actions such as stock splits, bonus issues, and dividend payments. When securities are in a dematerialized format, these operations can be handled more quickly.
- Faster Access to Financial Services: As investors can use their demat accounts as collateral, dematerialized securities facilitate faster access to a range of financial services, including margin trading and loans.
- Tracking & Reporting: Enhanced tracking and reporting of holdings, transactions, and investments is made possible by dematerialized securities.
Process of Dematerialisation
- Hold a Board Meeting for the following matters:
- Approval for Dematerialization of shares,
- Amendment in Articles of Association,
- Appointment of Depository and Registrar and Transfer Agent (RTA) and authorizing persons for signing of necessary documents,
- Calling of general meeting, if required;
- Convene a general meeting for amendment in Articles of Association of Company, to authorize the shareholders to hold the shares in dematerialized form, if required, by taking approval in the general meeting of members of the Company;
- Engagement with a SEBI registered Registrar and Transfer Agent (RTA) and execution of necessary documents in that behalf to appoint RTA. RTA shall act as intermediary between the Company and the depositories.
- Make application to RTA for dematerialization of shares andSubmission of certified true copy(ies) of the document(s) like Master Creation Form, Board Resolution etc. to depository.
- Payment of Admission fees
- Once the complete documentation is submitted with RTA and RTA approves the documents, ISIN shall be issued for the Company separately for each type of its securities.
FAQs
Yes, every listed company is required to provide shareholders the option to maintain demat accounts with both or either CDSL and/or NSDL, ensuring that their securities can be held electronically.
Since 2019, unlisted public companies must admit securities with Depositories (NSDL or CDSL).
No. All the Private Companies which as on the last day of financial year ending on 31st March, 2023 is not a small company, as per audited financial statements, shall within 18 months from the closure of the financial year facilitate dematerialization of shares or its securities.
Notable RTAs include Karvy, Alankit, Beetal Finance and Skyline.
The process of transferring physical securitiesinto an electronic or dematerialized form and depositing them with a depository is known as “admission of securities in a depository.” It is necessary for efficient ownership, settlement, and trading of financial securities.
The Central Depository Services Limited (CDSL) and the National Securities Depository Limited (NSDL) are India’s two main depositories.
Securities can be admitted to a depository by companies that are listed or unlisted. This covers bonds, stocks, and other money market securities.
Benefits from admitting stocks to a depository include streamlined ownership, effortless trading, less paperwork, increased security, and expedited settlement.
Indeed, in order for physical securities to be accepted into a depository, they must first be dematerialized. Paper certificates are converted to electronic form by dematerialization.
In the depository’s database, ownership of dematerialized securities is electronically documented. The holdings of every investor are monitored electronically.
Each security is given an ISIN, a distinct 12-character code, upon admission to a depository. It acts as the security’s global identifier.
Businesses must continue to abide by the rules established by the depository and the Securities and Exchange Board of India (SEBI). This covers prompt reporting and updates on the activities of the company.
