Ministry of Corporate Affairs (“MCA”) vide its notification dated 10th September, 2018, inserted Rule 9A of Companies (Prospectus and Allotment of Securities), Rules, 2014, (hereinafter called “said rules”) for Issue of securities in dematerialised form by unlisted public companies which is effective from 02nd October, 2018.
Dematerialization: It is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form. Dematerilsation is for enhancing transparency, investor protection and governance in the corporate sector.
Benefits of Dematerialisation: Elimination of risks associated with physical certificates such as loss, theft, mutilation and fraud. Other benefits includes preventing malpractices such as benami shareholding, back-dated issuance of shares, exemption from payment of stamp duty on transfer and ease in transfer, pledge, etc, of securities.
Definition of Securities
As per section 2(h) of the Securities Contracts (Regulations) Act, 1956 “securities” include shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate.
Key Highlights of Rule 9A
Every unlisted public company shall Issue the securities only in dematerialised form and facilitate dematerialisation of all its existing securities (obtain ISIN for each type of security).
Before making any offer for issue of any securities by unlisted public company, the entire holding of securities of its promoters, directors, KMP is in Demat form.
Every securities holder of unlisted public company shall get his securities in Demat form before transferring to any person or subscribing to any issue of securities.
Submission of reconciliation of share capital audit report.
The Grievances of security holders of unlisted public company under this rule shall be filed before the IEPF Authority.
Non-applicability of Rule 9A
This rule shall not apply to an unlisted public company which is:-
(a) a Nidhi;
(b) a Government company or
(c) a wholly owned subsidiary.
Filing of Reconciliation of Share Capital Audit Report
Sub rule 8 of rule 9A deals with the filing of Share Capital Reconciliation Audit report on half yearly basis with ROC, same is stated as under:
“The audit report provided under regulation 55A of the Securities and Exchange Board of India (Depositories and participants) Regulations, 1996 shall be submitted by the unlisted public company on a half-yearly basis to the Registrar under whose jurisdiction the registered office of the company is situated.”
This sub rule created lot of ambiguities because it didn’t provide for the form in which and time within which such report to be filed with ROC and the SEBI (DP) Regulations, 1996 has been replaced by SEBI (DP) Regulations, 2018 w.e.f. 03rd October, 2018.
ICSI vide letter dated 22nd April, 2019, had also made a representation before the MCA regarding practical difficulties faced by the professionals and company while filing such report to ROC.
After that, MCA vide notification dated 22nd May, 2019, substituted the sub rule 8 of rule 9A of the said rules as under which is effective from 30th September, 2019:
“Every unlisted public company governed by this rule shall submit Form PAS-6 to the Registrar with such fee as provided 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.”
Then MCA vide General Circular dated 28th November, 2019 extended the time limit for filing Form PAS-6 without additional fees for the half-year ended on 30.09.2019 by sixty days from the date of deployment of this form on the website of the Ministry.
The E-form PAS-6 is available for filing on MCA website from 15th July, 2020. The due date for filing e-form PAS-6 is 60 days from 15th July, 2020 i.e. 12th September, 2020.
The due date of e-form PAS-6 is falling under moratorium period starting from 01.04.2020 to 30.09.2020 given by MCA vide General Circular dated 24th March, 2020 (special measures taken in view of COVID-19 outbreak).
Therefore, Companies can file e-form PAS-6 till 30th September, 2020 without any additional fees for half year ended on 30.09.2019 and 31.03.2020.
Key Content of E-form PAS-6
ISIN (International Security Identification Number).
Details of capital of Company held in dematerialised form or physical form.
Details of changes in share capital during the half-year.
Details of shares held by promoters, directors and KMPs in the form of Demat or physical.
Details of number of requests, number of shares and reasons for delay for requests confirmed after 21 days or requests pending beyond 21 days.
Details of Company Secretary of the Company, if any.
Details of CA/CS certifying this form.
Q.1 What is an ISIN?
Ans. ISIN (International Securities Identification Number) is a unique 12 digit alphanumeric identification number allotted for a security (e.g. INE383C01018). Equity fully paid up, equity partly paid up, equity with differential voting /dividend rights issued by the same issuer will have different ISINs.
The e-form PAS-6 shall be filed for each ISIN of securities.
Q.2 What if, the Companies already filed PAS-6 to ROC in e-form GNL-2? Whether they need to file this report in e-form PAS-6 again?
Ans. If the Companies have already filed PAS-6 form through e-form GNL-2 and such form has been approved by MCA, then in these cases, the Companies are not required to file PAS-6 with ROC for half year ended 30.09.2019.
In cases where the GNL-2 has been rejected by MCA, then such companies has to file again the details of securities in PAS-6 as available in the MCA website.
Q.3If ISIN is obtain after 02.10.2018 (deadline date of dematerialization), is company required to file reconciliation of share capital audit report in PAS-6. If yes, then what will be the reporting period? Also, is there any violation of Rule 9A?
Ans. Yes, such Company is required to file Form PAS-6 for that half year in which ISIN is obtained. Further, the Deadline for taking ISIN is 02nd October, 2018 and if any Company has not obtained ISIN by that time then it is violation under Rule 9A of the ACT and the ROC have power to adjudicate this violation at any time in future.
Q.4 Whether Rule 9A of the said rules applicable on Deemed Public Companies (a Private Company which is subsidiary of Public Company)?
Ans. “Deemed Public Company” is defined under the proviso of Section 2 (71) of the Companies Act, 2013. It is stated that a private company which is a subsidiary of public company shall be deemed to be public company even where such subsidiary company continues to be a private company in its articles.
Accordingly, the Rule 9A of the said rules is applicable on deemed public company as well.
Q.5 Whether transfer includes transmission as well in relation to the above said rules related to Dematerialisation of shares?
Ans. The provisions of Rule 9A provides restrictions on transfer of shares which are in physical form but does not state any restrictions on transmission, hence it can be ascertain that transmission does not fall in the ambit of Rule 9A.
Q.6 Whether Private Companies which have already converted its physical shares into Demat voluntarily, is required to file PAS-6 under the said rules?
Ans. No, it is not required as the said rules is only applicable to Unlisted Public Companies and not on Private Companies.
Q.7 What is the penal provisions for not obtaining ISIN?
Ans. As there is no penalty prescribed under rule 9A for non-compliance, therefore section 450 (punishment where no specific penalty or punishment is provided) will be applicable.
As per Section 450, 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.
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