Table of Contents
- Relevant Provisions in the Companies Act, 2013
- Relevant Provisions in the Companies Rules
- Extant Provisions Applicable to Public Cos. Made Applicable to Not Small Cos.
1. Relevant Provisions in the Companies Act, 2013
1.1 Section 29 of the Cos. Act, 2013 – Public offer of securities to be in dematerialised form
(1) Notwithstanding anything contained in any other provisions of this Act,—
(a) Every company making public offer; and
(b) Such other class or classes of public companies as may be prescribed,
shall issue the securities only in dematerialised form by complying with provisions of Depositories Act, 1996 and Regulations made thereunder.
Word “Public” omitted by the Companies (Amendment) Act, 2019, w.e.f. 15-8-2019.
(1A) In case of such class or classes of unlisted cos. as may be prescribed, the securities shall be held or transferred only in dematerialised form in the manner laid down in Depositories Act, 1996 and the regulations made thereunder.
(2) Any Co., other than Co. mentioned in sub-section (1), may convert its securities into dematerialised form or issue its securities in physical form in accordance with the provisions of this Act or in dematerialised form in accordance with the provisions of the Depositories Act, 1996 and the regulations made thereunder.
2. Relevant Provisions in the Companies Rules
Companies (Prospectus and Allotment of Securities) Rules, 2014
2.1 Provisions mandating private Cos. (other than Small Cos.)
Every Private Company, other than a Small Company, shall within the period referred to in sub-rule (2):-
(a) Issue the securities only in dematerialised form; and
(b) Facilitate dematerialisation of all its securities, in accordance with provisions of the Depositories Act, 1996 and regulations made thereunder.
Rule 9B(1) of Companies (Prospectus and Allotment of Securities) Rules, 2014.
2.2 Definition of ‘Small Company’
Section 2(85) of the Companies Act, 2013 read with Rule 2(1)(t) of Cos. (Specification of definitions details) Rules, 2014
“Small Company” means a Company, other than a Public Company–
(i) Paid-up share capital of which does not exceed Rs. 50 lacs or such higher amount as may be prescribed which shall not be more than Rs. 10 crore; AND
(ii) Turnover of which as per P&L A/c for the immediately preceding FY does not exceed Rs. 2 crore or such higher amount as may be prescribed which shall not be more than Rs. 100 crore.
Cos. (Specification of definitions details) Rules, 2014:
“Small Company” means a Company, other than a Public Company, wherein paid-up capital does not exceed Rs. 4 crores AND turnover does not exceed Rs. 40 crores.
2.3 Following are ‘Small Companies’, irrespective of monetary thresholds
Nothing in this clause shall apply to—
a) Holding Co.
b) Subsidiary Co.
c) Co. registered u/s 8 of CA, 2013 or u/s 25 of CA, 1956
d) Company governed by any Special Act
e) Body corporate governed by any Special Act.
2.4 Mandatory compliance for ‘private companies’ – within 18 months
A private company, which as on last day of a financial year, ending on or after 31st March, 2023, is not a small company as per audited Financial Statements for such Financial Year,
shall, within 18 months of closure of such Financial Year, comply with the provisions of this rule.
Rule 9B(2) of Companies (Prospectus and Allotment of Securities) Rules, 2014.
2.5 Issue, buy-back, bonus shares, rights offer – mandatory demat for promoters, directors & KMP
Every Pvt. Co. referred to in sub-rule (2) making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer, after the date when it is required to comply with this rule, shall ensure that before making such offer, entire
holding of securities of its Promoters, Directors, KMP has been dematerialised in accordance with the provisions of the Depositories Act, 1996 and Regulations made thereunder.
Rule 9B(3) of Companies (Prospectus and Allotment of Securities) Rules, 2014
2.6 Mandatory demat for transfer, rights issue, bonus issue, Pvt. Placement
Every holder of securities of Pvt. Co. referred to in sub-rule (2), —
(a) who intends to transfer such securities on or after the date when Co. is required to comply with this rule, shall get such securities dematerialised before the transfer; OR
(b) who subscribes to any securities of the concerned Pvt. Co. whether by way of private placement or bonus shares or rights offer on or after the date when the company is required to comply with this rule shall ensure that all his securities are held in dematerialised form before such subscription.
Rule 9B(4) of Companies (Prospectus and Allotment of Securities) Rules, 2014.
3. Extant Provisions Applicable to Public Cos. Made Applicable to Not Small Cos.
3.1 Application of certain provisions of Rule 9A (Public Co.) to Rule 9B (Pvt. Co.)
- Securing International Security Identification Number (ISIN) for each type of security
- Informing all its existing security holders about demat facility
- Timely payment of fees (admission & annual) to the Depository and R&TA
- Maintaining deposits with Depository and R&TA
- Comply with regulations or directions or guidelines or circulars, if any, issued by SEBI or Depository
- In case of default in fees/deposits – Pvt. Co. shall not make offer of any securities or buyback its securities or issue any bonus or right shares till the payments are made;
- Provisions of Depositories Act, 1996, SEBI (Depositories and Participants) Regulations, 2018 and SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 shall apply mutatis mutandis;
- Co. shall immediately bring to the notice of depositories any difference observed in its issued capital and the capital held in dematerialised form
- Grievances, if any, of security holders of Pvt. Co. shall be filed before IEPF Authority
- IEPF Authority shall initiate any action against Depository or Participant or R&TA, after prior consultation with SEBI
3.2 Half-yearly compliance introduced for certain ‘Pvt. Cos.’
- Every applicable Pvt. Co. shall submit Form PAS-6 to the Registrar within 60 days from the conclusion of each half year duly certified by CS in practice or CA in practice;
- Reconciliation of shares
3.3 Recommendations
- Exemption should be considered for Pvt. Cos. that are wholly-owned subsidiary companies
- Exemption should be considered for Sec. 8 Cos.
- Clarity on timelines
- Consolidating half yearly returns along with annual compliances.
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