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SEBI-FEMA

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Transfer of shares in physical form to be stopped from April 1, 2019
Modification of circular dated December 7, 2018 on Disclosure of significant beneficial ownership in the shareholding pattern
Legal Entity Identifier: Extension of deadline
Investment by Foreign Portfolio Investors (FPI) in Debt – Review

Transfer of shares in physical form to be stopped from April 1, 2019

SEBI has recently amended relevant provisions of SEBI (Listing Obligations and Disclosure Requirements) (Fourth Amendment) Regulations,2018 to disallow listed companies from accepting request for transfer of securities which are held in physical form with effect from April 1,2019. The shareholders, who continue to hold shares and other types of securities of listed companies in physical form even after this date, will not be able to lodge the shares with the company for further transfer. They will need to convert them to demat form compulsorily if they wish to effect any transfer. Only the requests for transmission and transposition of securities in physical form will be accepted by the listed companies.

This amendment will help in curbing fraud and manipulation risk in physical transfer of securities by unscrupulous persons. Further, with shares held in demat form will improve ease, convenience and safety of transactions for investors.

All the investors who are holding shares etc. in physical form, should consider opening a demat account at the earliest and submit request for dematerialization of their shares in order to protect the liquidity of the shares. Utilise this mandate to demat them so you and your family can actually make use of the wealth locked in them.

The earlier deadline to convert shares in dematerialized form was with effect from December 5, 2018. Subsequently, SEBI had received representations from shareholders for extension of the date of compliance. In view of the same, the deadline was extended and the aforesaid requirement of transfer of securities only in demat form shall now come into force from April 1, 2019.

    FAQs for Mandatory Dematerialization

 

Q.1 What will happen if I don’t demat my physical shares?
Ans: In this case, you will not be able to sell or transfer your shares after April 1, 2019. You will have to wait for demat of shares before being able to sell/transfer them.

Q.2 In case of demise of shareholder holding physical securities, what could be the procedure to transfer those physical securities ((nominee registered / nominee not registered)?
Ans: Transmission and transposition of shares held in paper form will continue to be allowed. Transmission happens upon death of any or all shareholders. Transposition means change in ownership pattern; eg. From combination A & B (in this order) to B & A or from A & B & C to B & A & C. Though these will still be possible in paper form even after April 1, 2019, conversion to demat is still suggested for many other benefits it offers.

Q.3 What is to be done by the investors holding non-listed shares in physical form?
Ans: Investors may continue holding non-listed shares in physical form. They will be able to sell/transfer the shares as they wish even after April 1, 2019. However, you may suggest your non-listed company to join NSDL so that even those shares can be dematerialized, and shareholders can benefit from the same.

Modification of circular dated December 7, 2018 on Disclosure of significant beneficial ownership in the shareholding pattern

Securities and Exchange Board of India (SEBI) vide its circular dated 12th March, 2019 has modified the circular No. SEBI/HO/CFD/CMD1/CIR/P/2018/0000000149 dated December 7, 2018 with respect to disclosure of significant beneficial ownership in the shareholding pattern of listed entities to give effect to the amendments made by the Ministry of Corporate affairs (MCA) vide the Companies (Significant Beneficial Owners) Rules, 2018 amended on 8th February, 2019.

In view of the amendments to the Rules, the Circular dated December 7, 2018 shall stand modified as follows:-

1.The circular shall be applicable to those listed entities that are reporting companies as per Companies (Significant Beneficial Owners) Rules, 2018.

2. The submissions under this circular shall be in line with the requirements specified under Companies (Significant Beneficial Owners) Rules, 2018, and the revised formats as annexed with new Circular.

3. The circular shall come into force with effect from the quarter ended June 30, 2019.

Legal Entity Identifier: Extension of deadline

1. A reference is invited to circular FMRD.FMID.No.10/11.01.007/2018-19 dated November 29, 2018 issued by the Reserve Bank on requirement of Legal Entity Identifier (LEI) for participation in non-derivative markets.

2. Based on the feedback and requests received from market participants, and with a view to enable smoother implementation of the LEI system in non-derivative markets, the timelines for implementation (Phase I and Phase II) are extended as under:

Phase Net Worth of Entities Current Deadline Extended Deadline
Phase I above Rs.10000 million April 30, 2019 December 31, 2019
Phase II between Rs.2000 million and Rs 10000 million August 31, 2019 December 31, 2019
Phase III up to Rs.2000 million March 31, 2020 March 31, 2020

These directions are issued under section 45W, read with section 45U, of the Reserve Bank of India Act, 1934.

Investment by Foreign Portfolio Investors (FPI) in Debt – Review

1. Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Schedule 5 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017 notified vide Notification No. FEMA 20(R)/2017-RB dated November 07, 2017, as amended from time to time and the relevant directions issued thereunder. A reference is also invited to AP (DIR Series) Circular No. 22 dated April 6, 2018, AP (DIR Series) Circular No.31 dated June 15, 2018, and AP (DIR Series) Circular No. 26 dated March 27, 2019 on FPI investments in debt instruments.

2. As a measure to broaden access of non–resident investors to debt instruments in India, Foreign Portfolio Investors (FPI) are now permitted to invest in municipal bonds.

3. FPI investment in municipal bonds shall be reckoned within the limits set for FPI investment in State Development Loans (SDLs).

4. All other existing conditions for investment by FPIs in the debt market remain unchanged.

5. AD Category-I banks may bring the contents of the circular to the notice of their customers/constituents concerned.

6. Necessary amendments to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017 (Notification No. FEMA 20(R)/2017-RB dated November 07, 2017) have been notified by the Government on April 18, 2019 and are annexed to this circular.

7. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

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