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Securities and Exchange Board of India (SEBI) had earlier vide Circular No.: D&CC/FITTC/CIR-16/2002 dated 31st December, 2002 directed all Listed Companies to undertake the then called Secretarial Audit, by a qualified Company Secretary or a Chartered Accountant. The terminology used for the same was ‘Secretarial Audit’ as referred in the circular. It dealt with certification of reconciliation of total shares of a company held in both the depositories viz., NSDL, CDSL and in physical form by the shareholders with the total admitted, issued and listed share capital.

Reconciliation of Share Capital Audit Report (Half-yearly)

Thenafter, SEBI in 2003, through insertion of Regulation 55A in the SEBI (Depositories and Participants) Regulations, 1996 again introduced the requirement of Audit. The said regulation required every issuer to submit Audit Report on a quarterly basis, to the respective Stock Exchanges duly certified by a Practising Company Secretary or a Practising Chartered Accountant in order to reconciliate the total issued capital, listed capital and capital admitted in the two depositories which was held in demat form.

However, the term Secretarial Audit lately resulted in confusion among the professional circles and corporates when the actual Secretarial Audit encompassing vast area was introduced by the Ministry of Corporate Affairs in 2009. On recommendations of various stakeholders, SEBI vide its Circular No. CIR/MRD/DP/ 30 /2010 September 06, 2010 amended the terminology from ‘Secretarial Audit’ to ‘Reconciliation of Share Capital Audit’.

To further strengthen the Corporate Governance and in the light of digitalisation, Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 was brought into force over the Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2018 through MCA Notification dtd. 10th September, 2018 which made compulsory issue of securities in dematerialised form by Unlisted Public Companies effective from 2nd October, 2018.

Brief Summary of Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014is as under:

1. The provisions of the rules are applicable to all unlisted public companies except to an unlisted public company which is a Nidhi Company, Government Company or a wholly owned subsidiary Company.

2. Every unlisted public company shall issue further shares and securities only in dematerialised form and shall also facilitate dematerialisation of all its existing shares and securities.

3. Every unlisted public company making any offer for issue of shares / buyback of shares / bonus issue of shares / rights offer shall ensure that before making such offer, entire holding of its promoters, directors and key managerial personnel has been dematerialized.

4. Physical transfer of shares disallowed. The shareholder (after 02/10/2018) can only transfer the shares in dematerialised form. Moreover, the shareholder has to pre – ensure that all his existing shares are held in dematerialized form before subscription to shares whether by way of private placement / bonus issue / rights issue of an unlisted public company.

5. Every unlisted public company shall facilitate dematerialisation of all its existing securities by making necessary application to a depository (NSDL / CDSL or both) and secure International Security Identification Number (ISIN) for each type of security and shall inform all its existing security holders about such facility.

6. The Company can carry out any offer / buy – back / bonus issue / right only after making complete payments to depositories / RTA on successful execution of contracts / agreements.

7. The grievances, if any are lodged before IEPF Authority.

Earlier, under Rule 9A (8) the unlisted public companies were required to submit Reconciliation of Share Capital Audit Report as per regulation 55A of the SEBI (Depositories and Participants) Regulations, 1996 on half – yearly basis with Registrar of Companies. On the other side, SEBI replaced the SEBI (Depositories and Participants) Regulations, 1996 with SEBI (Depositories and Participants) Regulations, 2018 w.e.f. 3rd October, 2018. Under the earlier rule, the new regulations were not mentioned. Also no form / medium was then introduced for making submissions which created a lot of confusion in filing the Report among the corporates and professional fraternity. MCA then came up with the Companies (Prospectus and Allotment of Securities) Rules, 2014 by issuing Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2019 vide its notification dated 22nd May 2019 which was effective from 30th September, 2019. Through this amendment, MCA substituted 1996 Regulations with Regulations, 2018 and introduced Form PAS – 6 (Reconciliation of Share Capital Audit Report) to the Registrar of Companies, with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 and be filed within sixty days from the conclusion of each half – year. Form PAS 6 is to be duly certified by a Company Secretary in Practice or Chartered Accountant in Practice. Moreover, new Rule 9A (8A) has also been inserted which states that the Company shall immediately bring to the notice of the depositories any difference observed in its issued capital and the capital held in dematerialised form.

Later, MCA urged the stakeholders the format for Reconciliation of Share Capital Audit Report under Rule 9A (8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 is under process and such filings can only be made after the format for the same is made available.

Thenafter, on 28th November, 2019, MCA further clarified that the time limit to file PAS-6 without additional fees for the half year ended on 30th September, 2019 will be 60 days from the date of deployment of the PAS – 6 on the website of the Ministry.

Now, on 15th July, 2020, MCA deployed the Form on the website and we have to file PAS-6 within 60 days i.e. before 12th September, 2020 for the half year ended on 30th September, 2019 and 31st March, 2020:-

For filling Form PAS 6 and its particulars, some important points are discussed below:

Sr. No. Points of Consideration Particulars
1 ISIN (International security Identification Number) is mandatory for all unlisted public limit companies without which the form could not be filed.
2 When the Company has different type of Securities i.e. Equity, Preference, Debentures, etc. It has to obtain different ISIN for each type of securities and has to file different PAS-6 for each category of securities.
3 When the Company has not dematerialised its shares / securities by 30th September, 2019 / 31st March, 2020 ? Only fill data in,

In Point 5 (a) i.e. Issued Capital & 5 (d) i.e. Held in Physical Form. Elsewhere, mention 0.

4 Details of changes in share capital during the half-year. Details of changes in the share capital by way of issue of Private placement, Rights, Bonus, ESOPs, Amalgamation, Conversion, Buyback, Capital Reduction, Forfeiture and other are required to be given in Point No. 7
5 Mention the total no. of demat requests, if any, confirmed after 21 days and the total no. of demat requests pending beyond 21 days with the reasons for delay: Here, the details of number of requests for number of shares received and reasons for delay for requests confirmed after 21 days or requests pending beyond 21 days are required to be mentioned.
6 Certification Along with the digital signature of the Authorised Person of the Company, the eForm is to be signed (digitally) by a Chartered Accountant or a Company Secretary in whole-time practice.

When the eForm is completely processed by the authority concerned, an acknowledgement of the same, if any, will be received in mail.

Conclusion: The compliance of Reconciliation of Share Capital Audit Report will help in regularising the unstructured capital structure of many old companies wherein the physical registers were maintained. Moreover, the dematerialisation will also ease transfer and transmission of shares and securities, erstwhile which use to give rise to many disputes, particularly in widely held companies. Ultimately, it is a welcome step from the Ministry of Corporate Affairs.


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July 2024