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. This procedure' main goal 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 companies shall Issue the securities only in dematerialised form and Facilitate dematerialisation of all its existing securities.
Earlier this provision was mandatory for listed companies only but after 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.
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.
1. 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.
2. 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 who owns how many shares or bonds. Compared to paper certificates, this electronic record is more effective and secure.
3. 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.
4. Security and Safety: Securities' security and safety are improved by the electronic format. The possibility of physical certificates being stolen, misplaced, or damaged is decreased.
5. 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.
6. faster Access to Financial Services: Because investors can use their demat accounts as collateral, dematerialized securities facilitate faster access to a range of financial services, including margin trading and loans.
7. Tracking & Reporting: Better tracking and reporting of holdings, transactions, and investments is made possible by dematerialized securities.
Process for admission of equity and preference shares at NSDL and CDSL
● Engagement with a Registrar and Transfer Agent (RTA) ● Submission of certified true copy(ies) of the document(s) like Master Creation Form, Board Resolution etc to depository ● Tri-partite or bi-partite agreement should be executed ● Payment of Admission fees
1. Do all listed companies have to admit their securities with both CDSL and NSDL?
Yes, every listed company is required to provide shareholders the option to maintain demat accounts with both CDSL and NSDL, ensuring that their securities can be held electronically.
2. What's the obligation for unlisted public companies regarding Depository admission?
Since 2019, unlisted public companies must admit securities with Depositories (NSDL or CDSL).
3. Who are some famous Registrar and Transfer Agents (RTAs) in India?
Notable RTAs include Karvy, Alankit, Beetal Finance and Skyline.
4. What does it mean to admit securities to a depository?
The process of transferring physical assets into 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.
5. Which are India's principal depositories?
The Central Depository Services Limited (CDSL) and the National Securities Depository Limited (NSDL) are India's two main depositories.
6. To whom are securities admissible in a depository?
Securities can be admitted to a depository by companies that are listed or unlisted. This covers bonds, stocks, and other money market securities.
7. Why should I allow a depository to accept my securities?
Benefits from admitting stocks to a depository include streamlined ownership, effortless trading, less paperwork, increased security, and expedited settlement.
8. Before being allowed into a depository, do my physical securities need to be dematerialized?
Indeed, in order for physical securities to be accepted into a repository, they must first be dematerialized. Paper certificates are converted to electronic form by dematerialization.
9. How are dematerialized securities' ownership records kept?
In the depository's database, ownership of dematerialized securities is electronically documented. The holdings of every investor are monitored electronically.
10. A International Securities Identification Number (ISIN): What is it?
Each security is given an ISIN, a distinct 12-character code, upon admission to a repository. It acts as the security's global identifier.
11. After being admitted to a repository, what are the obligations for compliance and reporting?
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.