After the deployment of the E-form PAS-6 on the website of Ministry of Corporate Affairs on 15th of July 2020 various confusions can be seen in the market related to filing of PAS-6, Non dematerialisation of securities and its consequences, consequences of not getting the ISIN by the unlisted Public companies. Here in this article I tried of sorting some of the related queries in a brief manner.
With Effect from 2nd October 2018:
♣ Every unlisted public company shall –
(a) Issue the securities only in dematerialized form;
Every unlisted public company making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer shall ensure that before making such offer, entire holding of securities of its promoters, directors, key managerial personnel has been demateriarised in accordance with provisions of the Depositories Act 1996 and regulations made there under.
(b) Facilitate dematerialization of all its existing securities in accordance with provisions of the Depositories Act, 1996 and regulations made there under.
Every unlisted public company shall facilitate dematerialisation of all its existing securities by making necessary application to a depository as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 and shall secure International security Identification Number (ISIN) for each type of security and shall inform all its existing security holders about such facility
♣ After obtaining ISIN
(a) Makes timely payment of fees (admission as well as annual) to the depository and registrar to an issue and share transfer agent in accordance with the agreement executed between the parties;
(b) Maintains security deposit at all times, of not less than two years’, fees with the depository and registrar to an issue and share transfer agent in such form as may be agreed between the parties; and
(c) Comply with the regulations or directions or guidelines or circulars, if any, issued by the securities and Exchange Board or Depository from time to time with respect to dematerialisation of shares of unlisted public companies and matters incidental or related thereto.
♣ Every holder of securities of an unlisted public company,
(a) Who intends to transfer such securities on or after 2nd October, 2018, shall get such securities dematerialised before the transfer; or
(b) Who subscribes to any securities of an unlisted public company (whether by way of private placement or bonus shares or rights offer) on or after 2nd October, 2018 shall ensure that all his existing securities are held in dematerialized form before such subscription.
♣ Every unlisted public company shall submit Form PAS-6 to the Registrar
(a) Within sixty days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice.
(b) Vide General Circular no. 16/2019, due date for filing Form PAS-6 for the half year ended on 30.09.2019 will be sixty days from the date of deployment of the e-form on the website of Ministry of Corporate Affairs.
(c) Form PAS-6 is available for filing w.e.f 15th July 2020, accordingly the due date for filing the same shall be 60 days from 15th of July 2020 i.e., on or before 13th September 2020.
As per rule 9A of The Companies (Prospectus and allotment of securities) Rules, 2014, no penalty or fine is prescribed for violation of its provision. Therefore the penalty will be levied under section 450 of the Companies Act, 2013
section 450 ( punishment where no specific penalty or punishment is provided), according to this section the company and every officer of the company who is in default or such other person shall be punishable with fine which may extend to ten thousand rupees, and where the contravention is continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the contravention continues.
♣ Applicability and non-applicability
Provisions of rule 9A of The Companies (Prospectus and allotment of securities) Rules, 2014 are applicable on all unlisted Public companies except:
(a) A Nidhi Company;
(b) A Government company or
(c) A wholly owned subsidiary Company
Every unlisted public company on which rule 9A is applicable shall apply for separate ISIN for each type of security on or before 2nd day of October 2018 and provide the opportunity to its shareholders to convert their shares into demat (irrespective of the fact that the shareholders convert their shares into demat or not), if the company fails to secure a separate ISIN for each of its securities shall be liable for penalty under section 450 of the Companies Act, 2013.
PAS-6 shall also be filed within 60 days from each of the half year end. (As the form was deployed on 15th July 2020, 60 days will be counted accordingly).
♣ General queries:
Q 1. What if the shareholders fails to get their securities dematerialised??
Ans: Each of such shareholders shall be unable to transfer such securities before dematerialisation. (Ref. sub rule 3 of Rule 9A)
Q 2. What if the Company fails to get the ISIN before 2nd October 2018??
Ans: Shall be liable for penalty under Section 450 (Ref. sub rule 4 of Rule 9A)
Q 3. Will it mandatory to file PAS-6 if securities are not dematerialised??
Ans: Yes, it is mandatory for all unlisted public companies except 3) to file PAS-6, but having ISIN is mandatory. Non Dematerialisation will not be the issue.