THE COMPANIES (PROSPECTUS AND ALLOTMENT OF SECURITIES) AMENDMENT RULES, 2019

THE COMPANIES (PROSPECTUS AND ALLOTMENT OF SECURITIES) AMENDMENT RULES, 2019

The Ministry of Corporate Affairs is under the procedure of making constant improvement in the law structure of the corporate sector,

There are laws for better compliances and also for reducing burdens on some sectors of the corporate world,

One such change being the introduction of the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2019, where exception to comply with rule 9A i.e. Issue of securities in dematerialized form by unlisted public companies of the Companies (Prospectus and Allotment of Securities) Rules, 2014 has been granted to an unlisted public company which is a Nidhi/Government/Wholly Owned Subsidiary Company

The rule states that

1.      Every unlisted public company shall issue securities only in dematerialized form & facilitate the dematerialization of all existing securities

2.      Company should make sure that entire holding of securities of its promoters, directors, key managerial personnel is in dematerialized form before issuing offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer

3.      Every holder of security who intends to transfer securities on or after 2^nd October, 2018 or subscribes to any security shall make sure that such security is in dematerialized form

4.      Every unlisted public company shall facilitate dematerialization of all its existing securities by making necessary application to a depository

5.      Every unlisted public company shall ensure that (a) it makes timely payment of fees (admission as well as annual) to the depository and registrar to an issue and share transfer agent ; (b) it 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  ; and (c) it complies with the regulations or directions or guidelines or circulars, if any, issued by the SEBI or Depository from time to time with respect to dematerialization of shares of unlisted public companies and matters incidental or related thereto.

6.      No unlisted public company which has defaulted in sub-rule (5) shall make offer of any securities or buyback its securities or issue any bonus or right shares unless it has made good the default.

7.      Except as provided in sub-rule (s), the provisions of the Depositories Act 1996 the SEBI (Depositories and participants) Regulations, 1996 and the SEBI (Registrars to an Issue and share Transfer Agents) Regulations, 1993 shall apply to dematerialization of securities of unlisted public companies.

8.      The audit report provided under regulation 55A of the SEBI (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.

9.      The grievances, if any, of security holders of unlisted public companies under this rule shall be filed before the IEPF Authority.

10.  The IEPF Authority shall initiate any action against a depository or participant or registrar to an issue and share transfer agent after prior consultation with the SEBI

11.  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

 With this, unlisted public company which is Nidhi Company / Government Company / Wholly Owned Subsidiary Company are done away with the requirement of dematerializing their securities under rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014