The Securities and Exchange Board of India (SEBI) has vide, the SEBI (Listing Obligations & Disclosure Requirements) (Fourth Amendment) Regulations, 2018, inserted the following proviso clause under Regulation 40(1) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 (SEBI LODR):
Provided that, except in case of transmission or transposition of securities, requests for effecting transfer of securities shall not be processed unless the securities are held in the dematerialized form with a depository.
The said proviso clause provides that unless the securities are held in dematerialized form, no request for transfer of the securities shall be processed. The sole exception being transmission or transposition of securities.
Subsequently, SEBI vide circular dated 6th November, 2018, specified Standardized norms for transfer of securities in physical mode. The Circular was issued by SEBI subsequent to its discussion with the Registrars Association of India (RAIN) and the Depositories.
The SEBI Circular, drawing reference to the SEBI LODR (Fourth Amendment), 2018, provided for the modified procedure / documentation for transfer of securities in case of the following instances:
- Non-availability of PAN of the transferor for transfer deeds executed prior to 1st December, 2015;
- Mismatch of name in PAN card vis-à-vis name on share certificate / transfer deed;
- Major mismatch / Non-availability of transferor’s signature.
SEBI has, vide Circular dated 5th November, 2019, directed the Depositories and the Listed Companies / Registrar and Transfer Agents (RTA) to implement a due diligence process for processing of dematerialization request in respect of the physical shares.
The following are the salient features of the SEBI Circular:
- The Listed Companies / RTA are required to provide the following data, as on 31st March, 2019, pertaining to the shareholders / members holding shares in physical mode to Central Depository Services (India) Limited (CDSL) and National Securities Depository Limited (NSDL) latest by 31st December, 2019:
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- Name of the shareholder(s)
- Folio No.
- Certificate No.
- Distinctive No.
- PAN etc.
The exact format for submission of the aforesaid information shall be jointly provided by CDSL and NSDL & shall be communicated to the Listed Companies / RTAs in due course.
- On receipt of the data from the Listed Companies / RTAs, CDSL and NSDL shall capture the relevant details and put it place systems to validate any dematerialization request received after 31st December, 2019.
Further, for each Demat Request Number (DRN) received after 31st December, 2019, the depository system shall retrieve the name of the Shareholder(s) recorded against the particular folio and Certificate number and then validate it against the name of the demat account holder(s) as available in the Depositories record.
- In case of mismatch of name as appearing on the share certificate and the name of the demat account holder, the depository system shall raise an immediate flag / alert. In such a case, the following documents, as prescribed in the SEBI Circular dated 6th November, 2018, shall be additionally sought to address the difference in the name:
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- Copy of the Passport;
- Copy of legally recognized marriage certificate;
- Copy of gazette notification regarding change in name;
- Copy of Aadhar Card.
- In cases where there is complete mismatch in the name as appearing on the share certificate and the name of the demat account holder, the shareholder / member shall approach the Listed Company / RTA for the purpose of establishing his / her title or ownership rights.
The SEBI Circular has also directed CDSL and NDSL to make requisite amendments to its relevant byelaws, rules, regulations etc., for proper implementation of the Circular. It has also been advised that the status of implementation of the Circular shall be communicated to SEBI by CDSL & NSDL in their monthly report.
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