Companies (Prospectus and Allotment of Securities) 3rd Amendment Rules, 2018

The Ministry of Corporate Affairs vide G.S.R. 853(E) dated 10.09.2018 notified the Companies (Prospectus and allotment of securities) 3rd Amendment Rules 2018:

  • These rules shall come into force on 2nd October 2018.
  • As per the new rules every unlisted public company shall issue securities only in dematerialised form and as far as the existing securities are concerned, it shall facilitate their dematerialisation. All this shall be done in accordance with the provisions of the Depositories Act, 1996 and the regulations made thereunder.
  • 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 key managerial personnel has been dematerialised in accordance with provisions of the Depositories Ac! 1996 and regulations made there under.
  • Every holder of securities of an unlisted company who intends to transfer such securities on or after 2ndOctober 2018 shall get such securities dematerialised before the transfer.
  • Every holder of securities of an unlisted company 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 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.
  • Every unlisted public company shall ensure that

1. It 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

2. 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 in such form as may be agreed between the parties.

3. It complies 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.

No unlisted public company which has defaulted in the abovementioned rules shall make offer of any securities or buyback its securities or issue any bonus or right shares till the payments to depositories or registrar to an issue and share transfer agent are made.

  • 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. Except this the provisions of the Depositories Act 1996, the Securities and Exchange Board of India (Depositories and participants) Regulations, 1996 and the securities and Exchange Board of India (Registrars to an Issue and share Transfer Agents) Regulations, 1993 shall apply mutatis mutandis (i.e. after making necessary changes) to dematerialisation of securities of unlisted public companies.

These amendments shall be published in the Gazette of India, Extraordinary, Part II, Section 3, sub-section (i)

Copy of notification: MCA Notification (10.09.2018)

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