Q 1. What is the intent behind introduction of Form PAS-6?

Ans: The key purpose of Form PAS-6 is to undertake reconciliation of number of securities issued (share certificate / demat credit) matches / does not match with issued / paid-up capital. It attempts to ensure that there is no excess credit of securities as compared to the issued number of securities and that demat process is done in timely manner.

Q 2. What are the provisions relating to filing of Form PAS-6?

Ans: As per Section 29(1) of the Companies Act, 2013 “Notwithstanding anything contained in any other provisions of this Act, (a) every company making public offer,; and (b) such other class or classes of companies as may be prescribed; shall issue the securities only in dematerialised form by complying with the provisions of the Depositories Act, 1996 and the regulations made thereunder.”

Further as per Section 29(1A) of the Companies Act, 2013, “In case of such class or classes of unlisted companies as may be prescribed, the securities shall be held or transferred only in dematerialized form in the manner laid down in the Depositories Act, 1996 and the regulations made thereunder.”

The class of companies are prescribed in Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014, i.e., unlisted public companies. Rule 9A(8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 states that every unlisted public company shall submit Form PAS-6 with the Registrar of Companies by paying such fees as prescribed in Companies (Registration Offices and Fees) Rules, 2014 within sixty days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice.

The Form is required to be filed for the half year ended on 30th September 2019 and 30th March every year. Form PAS-6 has been deployed at MCA website on 15th July 2020 and is required to be filed within 60 days from the said date.

Q 3. If a company has multiple securities, does it need to file multiple Form PAS-6?

Ans: Yes, Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 is applicable for each class of security and in Form PAS-6 only one ISIN can be entered. Hence for multiple types and classes of securities, multiple forms are required to be filed. Form PAS-6 is devised ISIN wise and not Company wise. Hence, a company is required to file Form PAS-6 for each ISIN issued.

Q 4. Which provisions of the Act and / or rules made thereunder are to be examined while certifying Form PAS-6 by a professional?

Ans: Certification of the Form is not only about the data filled in Form PAS-6 but also about the entire Companies Act, 2013, Depositories Act, 1996 and all Rules in respect of dematerialisation of Securities. Hence, compliances of Section 29 of the Companies Act, 2013, Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014, Depositories Act, 1996 and Regulations made thereunder which are related to subject matter of Form PAS-6 will have to be examined and reported.

Q 5. Which class of companies are required to file Form PAS-6?

Ans: All unlisted public companies and subsidiary of public companies are required to file Form PAS-6. However Government companies, wholly owned subsidiaries and Nidhi companies although being unlisted public companies, are not required to file Form PAS-6.

It is important to note that as per Section 2(52) of the Companies Act, 2013 a ‘listed company’ means a company which has any of its securities listed on any recognized stock exchange. The Companies (Amendment) Bill, 2020, which has been passed by the Lok Sabha and Rajya Sabha proposes to insert a proviso in this section which can enable the Central Government to exempt, in consultation with SEBI, certain class of companies, which have listed or intend to list certain class of securities, from being considered as listed companies.

Once the amendment in Section 2(52) becomes effective and the Central Government prescribes Rules in this regard, many companies might get classified into the category of ‘unlisted public companies’, which are currently not considered to be ‘unlisted public companies’.

Q 6. Is Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 applicable for (a) unlisted public company but debt is listed, or (b) private company but debt is listed or (c) unlisted public company and debt is unlisted?

Ans: Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 is applicable only for unlisted public companies. As per Section 2(52) of the Companies Act, 2013, a ‘listed company’ means a company which has any of its securities listed. Hence, if debt security is listed, then such company (public or private) will not be covered in Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014. If debt as well as equity is unlisted, and company is public company, then Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 is applicable.

It is important to note the abovementioned proviso (as mentioned in answer to Q6 above) which is proposed to be inserted in Section 2(52) of the Companies Act, 2013 (in definition of listed company). Once this amendment in Section 2(52) becomes effective and the Central Government prescribes in this regard, this answer may change.

Q 7. Whether debt listed companies need to submit Form PAS-6?

Ans: As on date of this document, debt listed company is a listed company under the provisions of Companies Act, 2013. Therefore, there is no need to file Form PAS-6 with ROC. However, pursuant to the proposed amendment in Section 2(52) of the Companies Act, 2013 (as explained in Q6 and Q7 above), this answer may change.

Q 8. Can debt listed public companies issue, transfer or hold equity shares in physical form?

Ans: Debt listed companies are covered under Chapter IV of SEBI (LODR) Regulations, 2015. Since debt listed public companies are not covered under Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014, and they are also not covered under Regulation 40 of SEBI (LODR) Regulations, 2015 , there is no restriction on debt listed companies (public or private) to issue equity shares in physical form.

However, pursuant to the proposed amendment in Section 2(52) of the Companies Act, 2013 (as explained in Q6 and Q7 above) the compliances be carried out accordingly.

Q 9. If a company has obtained ISIN but some security holders have not converted their securities into demat form, is it a non-compliance of Section 29 of the Companies Act, 2013 or Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 and whether the same is to be qualified in Form PAS-6?

Ans: If Company has made intimation about ISIN and facility available for demat to all security holders as per Rule 9A(4) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, then Company has complied on its part. No time period is prescribed for converting existing securities into demat unless until any issue of securities or buy back of securities happens at Company level or any security holder approaches the Company for transfer of shares. However such companies have to file half yearly returns and have to mention that the securities are held by the members in physical form only.

Q 10. If preference shares / debentures are due for redemption, can they be redeemed in physical form? Is Form PAS-6 to be filed for securities fully redeemed during half year?

Ans: There is no restriction on redemption of securities in demat form and hence redemption can be done in physical form. If securities are fully redeemed as on end of half year, then ISIN should be extinguished by making application to the Depository. In such case, Form PAS-6 cannot be filed. However, as on the last date of the half year i.e. September 30th or March 31st if the ISIN is still in existence but preference shares / debentures were redeemed, then Form PAS-6 is required to be filed and the redemption of preference shares / debentures may be mentioned in the form by way of an attachment that the redemption has taken place and the ISIN is being extinguished.

Q 11. Can a company reject transfer of securities lodged in physical form? Whether to mention anything about it in Form PAS-6?

Ans: As per Rule 9A(3)(a) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, it is obligation of security holder to convert securities into demat form before lodging for transfer. If the physical securities are lodged for transfer, company should reject such transfers. If company has approved such transfer, then checking of Updation of Register of Members would reveal this and this can be considered as subject matter of Form PAS-6. It is a non-compliance and has to be mentioned in Form PAS-6.

Q 12. Whether mandatory demat is required for Compulsory Convertible Debentures also, which would surely get converted into equity shares? Whether Form PAS-6 is to be filed for CCD?

Ans: CCDs fall under the definition of ‘Securities’ and Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 is applicable. Hence the Company is under obligation to facilitate demat by obtaining ISIN. Rule 9A(8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 states that every unlisted public company governed by this Rule shall file Form PAS-6 However, Rule 9A(8A) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 speaks about difference observed in issued capital and capital held in demat form. Hence, ambiguity arises as to whether Form PAS-6 is to be filed for debentures or not. But it is recommended that Form PAS-6 is required to be filed even for CCDs.

Q 13. If a company gives buy-back offer, then whether holders of physical securities cannot tender for buy-back? Whether to mention the same in Form PAS-6?

Ans: As per Rule 9A(3) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, a security holder is under an obligation to convert securities into demat before lodging the same for transfer or before subscribing to new shares. There is no obligation on holders other than Promoters, Directors & KMP to convert into demat form before tendering for buy-back. In fact for listed companies also, SEBI has clarified vide Circular dated 31st July, 2020 that shareholders holding shares in physical form are allowed to tender shares in buy-back. There is no non-compliance on part of company and hence no need to mention in Form PAS-6.

Q 14. If some securities (held by persons other than promoters, directors and KMP of Company) are in physical form only, can company never do buy-back / issue new shares?

Ans: If entire holding of its promoters, directors, KMPs is in Demat Form, then buy back can be initiated by the company even if some securities are in physical form and buy back can be done even of those securities which are in physical form. However, in case of issue of securities, the allotment of new shares can be done only in demat mode.

Q 15. If a company does bonus issue, how to deal with physical security holders and Form PAS-6?

Ans: Company can keep the bonus entitlements of physical security holders in escrow demat account which can be credited only when they convert their existing holding into demat form.

Q 16. In what scenarios can there be difference in issued capital and total of shares held in physical plus demat?

Ans: The difference may arise in following scenarios:

  • Issue (offer) made by company – but pending for allotment
  • Issued but not subscribed capital
  • Allotment done but corporate action form with depositories not yet filed
  • Issued but forfeited shares

Q 17. What documents can be relied upon by PCS while certifying Form PAS-6?

Ans: PCS may verify following documents while certifying Form PAS-6:

  • Balance Sheet
  • BENPOS of past half year and current half year – with details of shareholders
  • Screenshots of NSDL & CDSL holding in company
  • Find out from Register of Members how many are in physical mode (can be matched through folios) and tally it with total paid-up capital
  • Register of Members [new allotment/ transfers]
  • Board resolutions passed, Form PAS-3 filed with MCA, Representation made by the company
  • PCS may search at MCA portal to be satisfied about all e-forms filed by the company.

Q 18. What proofs should be taken to verify para 12 (within 21 days demat credit) of Form PAS-6?

Ans: RTA provides list of demat requests received during half year – which contains as follows:

  • Lodgement date – when demat request was submitted with Depository Participant
  • RTA inward date – when RTA received from Depository Participant – PCS can ask for Demat Request Forms (DRF) filed by shareholder (with inward stamp of Depository Participant as well as RTA) as proof
  • Credit confirmation date – when demat credit was actually given – PCS can ask for screenshot from software of RTA.

PCS should also check:

Q 19. What other records are to be verified while certifying Form PAS-6?

Ans:

  • Copies of Corporate Action Forms filed
  • Copy of Register of Members maintained by RTA – check with format as per MGT-1.
  • Emails from NSDL, CDSL for Credit / Debit Corporate Actions executed.
  • Demat account statements of shareholders (if available) or else BENPOS for previous and current half year end.

Q 20. Whether Form PAS-6 is to be filed for preference shares and debentures also which might be issued long back?

Ans: Preference shares and Debentures fall under the definition of Securities under section 2 (81) of the Companies Act, 2013. Rule 9A(8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 provides that every unlisted public company shall file Form PAS-6 for all of its securities. However, Rule 9A(8A) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 speaks about difference observed in issued capital and capital held in demat form. Hence, ambiguity arises as to whether Form PAS-6 is to be filed for debentures or not. But it is recommended to file Form PAS-6 for preference shares and for debentures also.

Q 21. If a company does rights issue, can it offer to physical security holders? Whether it is to be mentioned in Form PAS-6?

Ans: As per Rule 9A(1)(a) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, company is under obligation to issue new securities in demat form only. Hence, it can make rights offer to physical security holders but with a disclaimer that their application will be accepted only if they convert existing holding into demat form and apply for new securities in demat form only.

Q 22. If a company has not yet obtained ISIN, can it file Form PAS-6?

Ans: ISIN is a mandatory field in Form PAS-6. Hence, if ISIN has not been obtained, then Form PAS-6 cannot be filed, which will lead to non-compliance of Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014.

Q 23. If Form PAS-6 is not filed by 13th September, 2020, would it be covered under Company Fresh Start Scheme 2020 (CFSS)?

Ans: As per point (iii) of MCA circular dated 30th March, 2020 on Companies Fresh Start Scheme, 2020, any defaulting company is permitted to file belated documents which were due for filing on any given date in accordance with the provisions of the said Scheme. However, in the list published on MCA website for forms covered under CFSS, Form PAS-6 is not covered. But as per prevailing practice, if a ticket is raised with MCA enquiring the said issue, it has been replied that Form PAS-6 is covered under CFSS.

Q 24. What is the first period for which the Form PAS-6 is required to be filed?

Ans: Half Year ended on 30th September, 2019.

Q 25. What was the due date of filing the Form PAS-6 for the half year ended on 30th September, 2019?

Ans: 13th September, 2020.

Q 26. What is the second period for which the Form PAS-6 has to be filed?

Ans: Half Year ended on 31st March, 2020.

Q 27. What is the due date of filing the Form PAS-6 for the half year ended on 31st March, 2020?

Ans: September 13, 2020

Q 28. Which are the class of companies to which Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 does not apply?

Ans: Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 does not apply to an unlisted public company which is:

(a) a Nidhi company

(b) a Government company

(c) a wholly owned subsidiary

Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 also does not apply to a private company.

Q 29. Is it necessary to file separate Form PAS-6 for each ISIN?

Ans: Yes, separate Form PAS-6 is to be filed for each ISIN. Each type of security will have a separate ISIN.

Q 30. Who is authorized to certify Form PAS-6?

Ans: A Practicing Company Secretary or a Practicing Chartered Accountant is authorized to certify Form PAS-6. This is over and above the certification given by the Director, Manager, CS, CEO & CFO.

Q 31. Is there any limitation on PCS regarding number of certification to be issued in respect of Form PAS-6?

Ans: There is no limit regarding number of certification to be issued in respect of Form PAS-6 by a PCS.

Q 32. Is communication to previous professional required to be made by a new PCS before certifying Form PAS-6?

Ans: There is no requirement to communicate to previous professional by a new PCS while certifying Form PAS-6.

Q 33. Can an unlisted public company issue securities in physical form?

Ans: No, an unlisted public company cannot issue securities in physical form.

Q 34. Is it compulsory that entire holding of securities of its promoters, directors, key managerial personnel of an unlisted public company has to be dematerialised before such company makes any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer?

Ans: Yes.

Q 35. Is it compulsory that in case of an unlisted public company the transferor of shares or proposed subscriber of private placement or bonus or rights offer has to get all his existing securities dematerialized before such transfer or subscription?

Ans: Yes.

Q 36. Can an unlisted public company have its own in-house registry system / share registry work instead of appointing a Share Transfer Agent?

Ans: Yes.

Q 37. What will be the consequence if an unlisted public company is non-working and do not want to take ISIN and further want to convert into private company and has not filed Form PAS-6?

Ans: A company shall facilitate dematerialisation of securities and communicate the same to its members. In case a company fails to facilitate dematerialisation of its securities then the penal provisions mentioned under section 450 of the Companies Act, 2013 shall be applicable which is Rs.10,000 and continuing penalty of Rs.1000 per day to the company and officer in default subject to maximum of Rs.2,00,000 on the company and Rs.50,000 per officer in default.

Q 38. Whether Form PAS-6 is to be filed when no shareholder has done demat of his shares until now however the company has facilitated demat of shares?

Ans: Yes

Q 39. What would be the penalty on late filing if ISIN generation is under process?

Ans: Penalty under section 450 of the Companies Act, 2013 will be applicable. However, till 30 September, 2020 form may be filed without additional fees and file Immunity Form under CFSS.

Q 40. What are the situations and circumstances in which point no. 10 and 11 of Form PAS-6 will be applicable to a company?

Ans: Point no. 10 and 11 will be relevant only in situations where dematerialised shares were in excess like:

(i) Form PAS-3 filed earlier had error and therefore revised Form PAS-3 filed subsequently as a result of which demat credit has happened in excess of issued capital, or

(ii) Fraudulently corporate actions of higher capital created without actually having that capital in books, etc.

Q 41. Whether UDIN is required to be generated for certification of Form PAS-6?

Ans: It is not mandatory.

Q 42. Is filing of Form PAS-6 applicable to the subsidiary and step down subsidiary of a listed company?

Ans: Exemption is available only to wholly owned subsidiary (WOS), otherwise it is required to be complied with.

Q 43. What happens when the subsidiary and holding relationship comes to an end in the middle of the Financial Year?

Ans: This compliance is required to be done for public company whenever it becomes public company and remains public company as on the date of closure of the financial year. In case a company becomes a private company, it has a choice to continue its securities in demat mode or otherwise.

Q 44. A Company Secretary was appointed in February, 2019 and resigned in December, 2019. In the Form PAS-6 for half year ending September, 2019, while filling the details of Company Secretary, error message appears that “the Company Secretary is not associated with the Company”. In this situation, should the form be processed without mentioning Company Secretary details for September, 2019 half year in the Form PAS-6”.

Ans: In case of any technical difficulty being faced, the form may be filed without mentioning the details of Company Secretary and a clarification may be added to the Form PAS-6 by way of an attachment.

Q 45. If in case of an unlisted public company where there are no operations since 3 years and it is going to apply for closure of the company shortly, is it necessary to convert the physical shares to demat form and comply with the requirement of filing Form PAS-6?

Ans: Any company till the time it is existing, it shall ensure compliance with the provisions of the Companies Act, 2013. As per Rule 9A(1) (a) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, the company should facilitate dematerialization of its securities and inform its members of the same. Since the company is going to apply for closure then no transfer or issue of securities may take place. Hence the members may or may not convert their securities in demat mode. However the Company shall file Form PAS-6 returns.

Q 46. Which amount should be mentioned in the issued capital column if the issued capital is Rs.5,10,000 and paid-up share capital is Rs.5,00,000 and all the shares are in the demat form with CDSL, which are 98.04% of total issued capital then total did not tally in point no.5 of Form PAS-6?

Ans: A company’s issued, subscribed and paid up capital may be different. The entire issued capital may not have been subscribed and then entire subscribed capital might not have been paid up. Hence there may be a variance between issued and the capital subscribed which may be either in demat mode or physical mode. In case there is a difference between issued capital and the total capital, the same may be explained. The purpose of Form PAS-6 is to ensure that the total capital in demat mode and physical mode should not be in excess of the total subscribed capital of the company. There is an anomaly here. One may mention issued capital what it is.

Q 47. Whether Annual Fees and Security Deposit Fees paid to Depository and RTA by the company is required to be checked and confirmed as per Rule 9A(5) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 while certifying Form PAS-6 by a Practising Company Secretary? If yes, what supporting documents are to be checked?

Ans: If there are any defaults w.r.t. Rule 9A(5) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, company cannot issue shares, etc. and certificate which Company Secretary issues needs to be looked at carefully.

Q 48. The field for “Issued Share Capital” in each of the form would be against the specific ISIN or would be the total share capital of the company, if there are 3 ISINs against Equity Shares, Class-A Equity Shares and Preference shares?

Ans: Data of respective ISIN should be mentioned in respective Form PAS-6. The intention is to allow one only one ISIN per security in the Form. And a clarification may be attached with each Form PAS-6 as to what is the consolidated issued and paid up capital of the company.

Q 49. Is ISIN mandatory for deemed public company having paid-up capital of Rs.1 lakh with two shareholders only.

Ans: A company which is subsidiary of public company shall be deemed to be public company and shall have 7 shareholders. As per Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 such unlisted public company shall facilitate dematerialisation for all existing securities.

Q 50. If an unlisted public company’s shares are not in demat form as on 31st March, 2020, but later on in August, 2020, the process of demat of shares was completed. In this case is the company required to file Form PAS-6 for the period 1st April, 2019 to 30th September, 2019 and 1st October, 2019 to 31st March, 2020?

Ans: Yes, it is required to file Form PAS-6.

Q 51. If an unlisted company has both equity and preference shares,and demat of equity shares were done but due to some reason demat of preference shares could not be completed. In this case can Form PAS-6 be filed for equity shares only?

Ans: Demat of preference shares is to be done by taking separate ISIN and Form PAS-6 will have to be filed for both equity and preference shares.

Q 52. A Company Secretary while trying to file Form PAS-6 for half years September, 2019 and March, 2020 is getting pre-scrutiny error as membership number is not associated with the company. How should file Form PAS-6 be filed in such situation?

Ans: Check appointment related forms and other e-forms where number was mentioned and see if there is any error. Raise ticket and still if it is not resolved, try to file without Company Secretary details and attach a clarification letter.

Q 53. Whether the provisions relating to Form PAS-6 are applicable to wholly owned subsidiary private company of an unlisted public company?

Ans: Subsidiary of a public company is public company. However, WOS has been specifically exempted from Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 so provisions relating to Form PAS-6 are not applicable.

Q 54. In Form PAS-6 shareholding pattern of promoters, directors and KMP is to be mentioned. What if promoters are also directors and they hold 10,000 shares? Shall 10,000 shares in promoters category and also 10,000 shares in directors category be mentioned? Will it not be miscalculation?

Ans: You can mention in any one category and attach clarification.

Q 55. What is the penalty for delay in filing of Form PAS-6?

Ans: One time penalty of Rs.10,000 and for continuing default Penalty of Rs.1000 per day on company and officer in default as per section 450 of the Companies Act, 2013 will be applicable subject to maxmum of Rs.2,00,000 on the Company and Rs.50,000 per officer in default.

Q 56. Whether Form PAS-6 is mandatory for unlisted government companies exempted from demat?

Ans: A Government company is exempted under Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 therefore filing of Form PAS-6 is not mandatory.

SOURCE – ICSI REFERENCER ON PAS-6

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