FAQs on filing of PAS-6 and Demat of Shares

Question: Is it applicable to all the Companies?

Answer:  No, it is applicable on every unlisted public company shall except the following unlisted public companies:

1.  Nidhi;
2. a Government company or

a wholly owned subsidiary 

Question: Is there any exemption for any public Company for filing this form and private company which directly indirectly covered under this category?

Answer:  The rule 9A of The Companies (Prospectus and Allotment of Securities) Rules, 2014 provides exemptions to the following unlisted Public Companies:

a.         Nidhi;

b.         Government company or

c.         wholly owned subsidiary.

Any private company being a deemed Public company as per section 2(71), covered under the above mentioned category of exempted companies shall also be exempted. 

Question: What is the Governing Section of Rule 9A?

Answer:   Section 29(1A) of the Companies Act, 2013 governs the Dematerialization of Shares of Public Companies. 

Question: In that public company in which there is no transfer or issue of shares,   whether required to comply Demat compliance and also in how much time?

Answer:  A public company in which there is no transfer or issue of shares, the company still needs to facilitate Dematerialisation of its securities to its shareholders.   

Question: Due Date for filing PAS-6?

Answer: The last date for filing of PAS-6 after deployment of form PAS-6 is 13th September 2020 and thereafter 60 days from the date of the conclusion of each half year. However, to overcome the outbreak of COVID-19 threat and in order to reduce the compliance burden, the Ministry of Corporate Affairs has declared a moratorium period from 1st April, 2020 to 30th September, 2020 wherein no additional fees will be levied during this period for the forms to be filed with the Ministry, irrespective of their due dates. 

Question:  How these provisions of compulsory issuance of shares in Demat form is contradictory to issue of shares in the physical form?

Answer:  Section 46 (1) of the Companies Act, 2013 requires a company to issue a certificate, issued under the common seal, if any, of the company or signed by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary, specifying the shares held by any person, shall be prima facie evidence of the title of the person to such shares.  Since, if the shares are in depository form, share certificate cannot be issued, as in, section 46(4) of the companies act, 2013 provides “Where a share is held in depository form, the record of the depository is the prima facie evidence of the interest of the beneficial owner.”

Hence, the provisions for issuance of shares in physical form are not contradictory to the issuance of shares in Demat form.

Question:  Whether Demat shares also requires stamping of shares, if yes, then what are the legal provisions regarding this?

Answer:   As per the Indian Stamp Act, 1899 and the Indian Stamp (Amendment) Act, 2019 (effective from 1st July 2020), the brief analysis of the provisions related to stamp duty of shares shall be as follows:

1. It has been clarified that stamp duty shall be payable on each sale or purchase of securities, whether delivery based or otherwise, through a stock exchange which are listed in the clearance list. Such stamp duty will be paid by the buyer on the market value of such securities at the time of the settlement of transaction of securities of such buyer.
2. All off-market transactions where any security either listed or unlisted is transferred (delivery based or otherwise) through the Depository including over the counter trades occurring in dematerialized or electronic form shall be subject to stamp duty, which shall be collected by the Depository from the Transferor/seller on the consideration amount mentioned on the delivery instruction slip before the execution of transfer. However, in case of invocation of pledge, the stamp duty shall be collected from the Pledgee i.e. bankers/ lenders.
3. As per the Amendment, any issue, sale or transfer of securities other than through stock exchange or depository shall be collected from the issuer or the transferor on the total market value of the securities so issued or on the consideration amount specified in the instrument effecting the transfer.

The detailed analysis of the relevant provision will be updated on our website soon.

Question:  Is it compulsory for the shareholders to held shares in the Demat form?

Answer: It is not necessary for the shareholder to hold its shares in Demat Form but if the shares of the shareholder are not converted in Demat form, the shareholder shall not be able to:

1. Transfer its shares
2. Subscribe to any shares of the company in case any issue of shares by the company  

Question: Whether it is compulsory for promoters, KMP, directors to maintain their shares in Demat form?

Answer:  Only in case of 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, and key managerial personnel has been dematerialised.    

Question: What are the penal consequences for non-Demat and non-filing of Form PAS-6?

Neither the section nor the Rules provide any penal consequences for non‐ compliance thereof. However, the same will get hit by Section 450 of the Act which is a residuary provision for penalty. The said Section prescribes a fine which may extend to 10000 rupees for initial default and a further fine which may extend to 1000 rupees for every day for a continuing one for the company and every officer of the company who is in default.

Question: How many return we have to file?

Answer: Companies have to file 2 PAS-6 for each category of securities:

• One for the period 01/04/2019 to 30/09/2019

• Second for the period of 01/10/2019 to 31/03/2020

Question: When the requirement to file the form came?

Answer:    The sub-rule 8 was substituted by notification of MCA dated 22nd May, 2019 and the Form PAS-6 was introduced and made effective from 30th September, 2019.           

Question: For different forms of securities, how many forms required to be filed?

Answer: If a company have different type of securities i.e. Equity, Preference, Debentures, etc. in such case company needs to obtain different ISIN for each type of security and has to file different PAS-6 for each category of securities.

Question: For different securities different whether different ISIN will be required?

Answer:  Yes, for each type of security the company needs to obtain different ISIN.

Question: Is any intimation is required to be given to any department regarding Demat?

Answer:  No intimation needs to be given on Demat of shares. Company needs to semi-annually file form PAS-6 for Reconciliation of share capital within 60 days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice.

For any clarifications/suggestions or any queries please write drop a comment or write to us at info@sigmalegal.in

TEAM SIGMA LEGAL

(SECRETARIAL DEPARTMENT)