SEBI has proposed amendments to its Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, primarily aiming to increase the dematerialization of securities and simplify existing compliance procedures. The core objective is to prevent the creation of new physical securities by listed companies, especially during corporate actions like the consolidation or splitting of face value of securities, and the issuance of securities through schemes of arrangement (e.g., mergers, demergers). This initiative supports SEBI’s long-standing goal of full dematerialization, which offers benefits such as reduced fraud, efficient transfers, and enhanced regulatory oversight. To facilitate this, a new Regulation 39(2A) is proposed, which will mandate that listed entities issue securities in dematerialized form for these specific corporate actions. For investors without a demat account, the listed entity will be required to open a separate demat account for their securities.
In addition to promoting dematerialization, the proposed amendments also seek to streamline certain regulatory requirements. A working group recommended the deletion of specific provisions within Regulation 40(4) and 40(5) of the LODR Regulations. These provisions, concerning the registration of physical share transfers, are now obsolete since physical share transfers were discontinued by SEBI in April 2019. Furthermore, the amendments propose to remove the requirement for listed entities to maintain “proof of delivery” as specified in Schedule VII of the LODR Regulations. This change acknowledges that proof of dispatch is already maintained by listed entities, and courier/speed post services retain delivery records for a reasonable period, making it impractical and unnecessary for companies to download and store individual proof of delivery records. These proposed changes, which underwent public consultation and received significant support, aim to update the regulations in line with the current regulatory landscape and reduce redundant compliance burdens.
Securities and Exchange Board of India
Amendments to SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 with the objective of encouraging dematerialization of securities and streamlining certain processes in view of current regulatory landscape
1. Objective:
1.1. This memorandum seeks approval of the Board to make amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred as the “LODR Regulations”) for (i) mandating issuance of securities by listed entities only in dematerialised form in case of the following corporate actions, viz. consolidation/split of face value of securities and scheme of arrangements to encourage dematerialised holding of securities (ii) modifying certain provisions in view of current regulatory landscape, viz. deletion of requirement of maintaining proof of delivery by the listed entity under Para B(1) and B(2) of Schedule VII.
2. Background:
2.1. Despite various policy measures being taken on an ongoing basis for issuance of securities by issuer companies only in demat mode, the following avenues are still available for listed companies for issuance of securities in physical mode by way of corporate actions:
(i) Consolidation of Face Value of Securities;
(ii) Sub-Division or split of Face Value of Securities;
(iii) Issuance of securities pursuant to Scheme of Arrangement viz. merger, demerger and reconstruction etc.
2.1.1. In accordance with SEBI’s objective to ensure complete dematerialisation of securities, in view of the multiple benefits of dematerialisation including reduction of fraud and forgery, efficient transfers, transparency and improved regulatory oversight, it is felt necessary to prevent fresh creation of physical securities by listed companies for the corporate actions mentioned above.
2.2. Further, a Working Group (“WG”) formed for review of the SEBI (Registrar & Share Transfer Agents), Regulations, 1993 comprising of market participants such as Listed Companies, Registrars to an Issue and Share Transfer Agents, Mutual Funds and Legal Experts had recommended deletion of Regulations 40(4) and 40(5) of the LODR Regulations, as detailed below, pertaining to registration of transfers and related provisions, in view of the fact that transfer of shares in physical form has been discontinued by SEBI w.e.f. 1st April, 2019.
a. Regulation 40(4) – “The listed entity shall not register transfer when any statutory prohibition or any attachment or prohibitory order of a competent authority restrains it from transferring the securities from the name of the transferor(s).”
b. Regulation 40(5) – “The listed entity shall not register the transfer of its securities in the name of the transferee(s) when the transferor(s) objects to the transfer:
Provided that the transferor serves on the listed entity, within sixty working days of raising the objection, a prohibitory order of a Court of competent jurisdiction.”
2.3. The WG also recommended doing away with the requirement of maintaining “proof of delivery” as specified in Schedule VII of LODR Regulations in view of the fact that listed entities already maintain the record of proof of dispatch and the dispatches are done through speed post/courier wherein the record of proof of delivery is maintained upto six months for reference. Further, it may not be practical for listed entities to download the proof of delivery record by record and maintain the record of the same.
2.4. Public Consultation
2.4.1. In order to seek public opinion on the proposed amendment to LODR Regulations with respect to (i) compulsory issuance of new securities in dematerialised form pursuant to consolidation/split of face value of securities and scheme of arrangements and (ii) modification to certain provisions in view of current regulatory landscape, a consultation paper containing a brief of the proposals on the captioned subject matter was issued on January 14, 2025 (Annexure A) inviting comments regarding the proposal in the consultation paper. The consultation period ended on February 4, 2025.
2.4.2. 19 responses were received on the proposals, out of which, 16 comments were received in favour of the proposals. The public comments and our responses on the same have been placed at Annexure B.
(This has been excised for reasons of confidentiality).
2.5. Recommendation
2.5.1. Taking into account the comments received from public and internal deliberations, the following is proposed:
2.5.1.1 Issuance of new securities pursuant to (i) consolidation/split of face value of securities and (ii) scheme of arrangements:
In order to gradually progress towards complete dematerialisation of securities and to prevent fresh creation of physical securities by listed entities, it is proposed to amend LODR Regulations by way of insertion of new Regulations 39(2A), mandating issuance of securities only in dematerialised form in case of consolidation/split of face value of securities and scheme of arrangements to encourage dematerialised holding of securities.
Regulation 39(2A)
“(2A) The listed entity shall issue securities pursuant to any scheme of arrangement or any sub-division, split or consolidation of securities only in the dematerialised form:
Provided that the listed entity shall open a separate demat account for such securities of investors not having a demat account.”
2.5.1.2 Amendment to Schedule VII of LODR Regulations in view of current regulatory landscape:
In view of current regulatory landscape, the following two provisos of Schedule VII are proposed to be deleted in the entirety from LODR Regulations:
“Under Para B (1) of Schedule VII
Provided that the listed entity shall maintain proof of delivery for in their record(s).”
“Under Para B (2) of Schedule VII
Provided that the listed entity shall maintain proof of delivery for in their record(s).”
2.5.2. The amendments to LODR Regulations required to implement the recommendation made at paragraphs 2.5.1.1 and 2.5.1.2 above are given in Annexure C for approval.
3. Proposal for consideration and approval of the Board:
3.1. The Board is requested to:
3.1.1. consider and approve the recommendations stated at paragraph 2.5 to suitably amend the LODR Regulations.
3.1.2. authorize the Chairperson to take necessary steps to implement the proposals including notification of amendments, issuing circulars, wherever necessary with consequential and appropriate changes, as may be required.
Encl.:
Annexure A – Consultation Paper on Certain amendments to SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 with the objective of encouraging dematerialization of securities and streamlining certain processes in view of current regulatory landscape
Annexure B – (This has been excised for reasons of confidentiality.)
Annexure C – Present provisions and proposed Amendments to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015
Annexure A
(Available on SEBI Website www.sebi.gov.in under the head “Reports & Statistics”>>”Reports”>>”Reports for Public Comments”)
Annexure B
(This has been excised for reasons of confidentiality.)
Annexure C
Present provisions and proposed Amendments to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015
1. Insertion of new Regulations 39(2A), mandating issuance of securities only in dematerialised form in case of consolidation/split of face value of securities and scheme of arrangements to encourage dematerialised holding of securities
Regulation 39(2A).
“(2A) The listed entity shall issue securities pursuant to any scheme of arrangement or any sub-division, split or consolidation of securities only in the dematerialised form:
Provided that the listed entity shall open a separate demat account for such securities of investors not having a demat account”
2. Modifications to certain provisions of LODR Regulations: Doing away with the requirement of maintaining “proof of delivery” (Schedule VII)
| Reg. | Current Provision | Proposed Change |
| Schedule | B. Difference in Signature | |
| VII | 1(a)…… | |
| 1(b)…… | ||
| Provided, that the listed entity shall maintain proof of delivery for in their record(s). | Proviso to be omitted. | |
| 2(a)…… | ||
| 2(b)…… | ||
| 2(c)……. | ||
| 2(d)……. | ||
| Provided, that the listed entity shall | ||
| maintain proof of delivery for in their record(s). | Proviso to be omitted. |
Source: SEBI Board meeting 18th June 2025: https://www.sebi.gov.in/sebiweb/about/AboutAction.do?doBoardMeeting=yes#
