The Recent Amendment in the PAS Rules
Mamta Binani & Associates
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Note on - The Companies (Prospectus & Allotment of Securities) Third
Amendment Rules, 2019
Introduction
On the 10th of September 2018 the Ministry had brought in a notification vide which the
Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2018 (Amended
Rules) was brought into effect from 2 nd October 2018 onwards. This notification dealt with the
issue of securities in dematerialized form by unlisted public companies.
Following the above-mentioned notification, on the 22nd of May, 2019 the MCA brought in
certain changes in the Companies (Prospectus and Allotment of Securities) Rules, 2014
(Principal Rules) vide the Companies (Prospectus and Allotment of Securities) Third
Amendment Rules, 20191.
This shall come into effect from the 30th of September 2019.
The prime amendment has been with regard to rule 9A2 - issue of securities in dematerialized
form by unlisted public companies of the Amended Rules.
This comes in when the government alongwith the Ministry aims at clamping down the
numerous shell companies that are suspected of being used to handle illicit funds in the garb of
that company. Also, physical shares are generally associated with theft, loss and mutilation and
dematerialized form of the same makes it safe. The biggest benefit being in having better
corporate governance over shareholding matters in turn increasing the credibility of records.
Some other advantages in brief are as follows:-
The risks pertaining to physical certificates like forgery and damage are eliminated
completely with a DEMAT account.
The lack of paperwork enables quicker transactions and higher efficiency in trading.
Trading becomes more convenient as one can trade without the need of visiting a broker.
1
http://www.mca.gov.in/Ministry/pdf/Rules_23052019.pdf
2
http://www.mca.gov.in/Ministry/pdf/CompaniesProspectus3amdRule_10092018.pdf
The Recent Amendment in the PAS Rules
The shares that are created through mergers and consolidation of companies are credited
automatically in the DEMAT account.
As all the transactions occur through the depository participant, a trader does not need to
communicate individually with each and every company.
There is no need for stamp duty for transfer of securities; this brings down the cost of
transaction significantly.
Certain banks also permit holding of both equity and debt securities in a single account.
Banks also provide dedicated and trained customer care officers to assist you through all
the procedures.
One can also choose to take a loan against securities which are held in a DEMAT account
by offering it as a collateral to the lender.
Amendment vide the notification
The amendments are shown below in a tabular format:-
Rule Pre amendment Post amendment
7 Except as provided in sub-rule (8), the Except as provided in sub-rule (8), the
provisions of the Depositories Act, 1996, provisions of the Depositories Act,
the Securities and Exchange Board 1996, the Securities and Exchange
of India (Depositories and Participants) Board of India (Depositories and
Regulations, 1996 and the Securities and Participants) Regulations, 2018 and
Exchange Board of India (Registrars to an the Securities and Exchange Board of
Issue and Share Transfer Agents) India (Registrars to an Issue and Share
Regulations, 1993 shall apply mutatis Transfer Agents) Regulations, 1993
mutandis to dematerialisation of securities shall apply mutatis mutandis to
of unlisted public companies. dematerialisation of securities of
unlisted public companies.
8 The audit report provided under regulation Every unlisted public company
55A of the Securities and Exchange Board governed by this rule shall submit
of India (Depositories and Form PAS-6 to the Registrar with
Participants) Regulations, 1996 shall be such fee as provided in Companies
submitted by the unlisted public company (Registration Offices and Fees)
on a half-yearly basis to the Registrar Rules, 2014 within sixty days from
under whose jurisdiction the registered the conclusion of each half year duly
office of the company is situated. certified by a company secretary in
practice or chartered accountant in
practice.
8A (Not there earlier) The company shall immediately
bring to the notice of the
depositories any difference observed
in its issued capital and the capital
held in dematerialised form.
The Recent Amendment in the PAS Rules
(Not there earlier) Inclusion of PAS-6 pertaining to
Reconciliation of Share Capital
Audit Report (half-yearly).
All information shall be furnished
for the half year ended 30th
September and 31st March in every
financial year for each ISIN
separately
Conclusion
With the introduction of such amendments and forms the ministry is stepping in the form of
intervention for a company in the direction of better governance. Also, if implemented in letter
and spirit, a handful of wrongdoings will be eliminated and a fairer picture will be shown to the
stakeholders. It will also prohibit the wrong doers from taking unlawful benefits through the
route of shareholding.
This together with the SBO (Significant Beneficial Ownership) Rules that have been recently
brought in paves a way to have a clearer picture of the shareholders of the company.
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not be entertained. This document is only for knowledge sharing purpose and is not to be construed in any other
manner whatsoever.
