Is after denomination of rupee, dematerialization of shares is next weapon? The government is planning to dematerialize the shares of unlisted limited companies to as a part of the broader the crack down on black money. There is still a very little understanding about dematerialization of shares. Even in today where our PM is trying to connect India digitally, there are still many small shareholder holding shares of even listed company in paper form. According to recent study the person holding share in paper form are either don’t have the knowledge or have used black money to purchase the shares. If an unlisted shares want it can issue shares in dematerialize form.
In India, a depository is an organization which holds securities of investors in electronic form at the request of the investors. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) are currently the two registered depositories with SEBI. However, investors cannot directly trade through depositories and must interact through a depository participant. A Depository Participant (DP) is an agent of the depository through which it interfaces with the investor and provides depository services. Many public financial institutions, commercial banks, stock-brokers, clearing corporations /clearing houses and NBFCs complying to the requirements of SEBI are registered as Depository Participants. Both the NSDL and CDSL has hundreds of depository participants through whom investors can deal. To convert shares of a private limited company into demat form, the company and the investors of the company must enter into an agreement with depository participants.
A company has to join the NSDL as Issuer where an Issuer may offer demat facility to its shareholders by admitting the securities in NSDL. Issuer should obtain electronic connectivity with the existing Registrar & Transfer Agent (R&T Agent) or by obtaining In-House connectivity.
After submitting the requisite set of documents to NSDL, NSDL will send blank copies of Tripartite Agreement (3 copies with franking of Rs 200/- each) to the R&T Agent. The 3 copies of agreement should be sent to NSDL after signing by R&T Agent & Issuer.
ISIN (International Securities Identification Number) generated by NSDL for the security will be conveyed to the Issuer.
Below are the list of documents that are required for creating company demat account.
Fees and Charges for NSDL
(a) Joining Fee by Issuers
(b) Annual Custody Fee:
|Nominal Value of Securities admitted (Rs.)||Amount (Rs.)|
|Up to 5 crore||9,000.00|
|Above 5 crore and upto 10 crore||22,500.00|
|Above 10 crore and upto 20 crore||45,000.00|
|Above 20 crore||75,000.00|
The fee will be based on average number of folios (ISIN positions except temporary ISINs) during the previous financial year. Average number of folios (ISIN positions) will be arrived at by dividing the total number of folios (ISIN positions) for the entire previous financial year by the total number of working days in the said previous financial year. In case the issued capital or ISIN positions increase during the financial year due to issue of further shares, by way of public offer, the custody fee would be charged on a pro-rata basis, at the time of such issue.
Provided however that, in case the issued capital or ISIN positions increase during the financial year due to issue of further shares, by way of public offer, the custody fee would be charged on a pro-rata basis, at the time of such issue.
If an Issuer fails to pay the fees mentioned under “Annual Custody Fee” by the due date, the Depository may charge interest @ 12% p.a. on the amount, from the due date of payment till the payment is received by the Depository. Provided further that the Depository may stop providing details of clients / clearing members / clearing corporation / intermediary to the Issuer and / or its Registrar and Transfer Agent as mentioned in the Bye Laws and Busin Provided further that the Depository may not permit the Issuer to use its infrastructure including for issue of further securities in electronic form.