The Securities and Exchange Board of India (“SEBI”) vide its circular dated September 7, 2020, had fixed March 31, 2021 as the cut-off date for re-lodgment of transfer requests and had stipulated that such transferred shares will be issued only in demat mode.
In this regard, SEBI, now vide its circular dated December 2, 2020 (“Circular”), has stipulated the operational guidelines for crediting the transferred shares into the demat account of the investors. Key terms of the operational guidelines are as follows:
a) Guidelines to credit the transferred physical shares in demat mode:
i. Upon processing of the re-lodged transfer request, the registrar and share transfer agents (“RTAs”) are required to retain the physical shares and intimate the investor (transferee) about the execution of transfer through a letter of confirmation (in the suggested format specified in the Circular).
ii. The investor is required to submit the demat request, within 90 days of issue of the aforesaid letter of confirmation, to the depository participant along with the letter of confirmation. RTAs are also required to issue a reminder to the investor, at the end of 60 days of issue of the letter of confirmation, for submitting the demat request as above.
iii. The depository participant will process the demat request basis the letter of confirmation.
b) In case of non-receipt of demat request from the investor within 90 days of the date of the letter of confirmation, the shares will be credited to the suspense escrow demat account of the company.
c) SEBI had vide its circular dated November 6, 2018, specified certain standardised norms for transfer of shares in physical mode, which mandated that shares/ securities so transferred are required to be under lock-in for a period of 6 (six) months from the date of registration of transfer and should not be transferred/ dematerialized during the said period. Pursuant to the Circular, SEBI has specified that, in case of such locked-in shares, the RTA while approving the demat request will also intimate the depository about the lock-in period and such shares shall be in lock-in demat mode for 6 months from the date of registration of transfer.
d) Depositories are required to:
i. make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above directions; and
ii. bring the provisions of the Circular to the notice of their participants and also, disseminate the same on their websites.
Please find a copy of the Circular here.
This update has been contributed by Aastha (Partner) and Swaraj Narula (Associate).
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