QUESTION: What are the rights and obligations of Depositories, Participants, Issuers and beneficial owners as given under Depositories Act 1996?
ANSWER:
- AGREEMENT BETWEEN DEPOSITORY AND PARTICIPANT: A depository shall enter into an agreement with one or more participants as its agent. Every agreement must be in the form as specified by the bye-laws.
2. SERVICES OF DEPOSITORY: Any person, through a participant, may enter into an agreement, in such form as may be specified by the bye-laws, with any depository for availing its services.
3. SURRENDER OF CERTIFICATE OF SECURITY: Any person who has entered into an agreement shall surrender the certificate of security for which he seeks to avail the services of the depository.
The issuer on the receipt of certificate of Security, shall cancel the certificate of security and substitute in its books/records, the name of the depository as a registered owner in inform the depositor accordingly.
4. REGISTRATION OF TRANSFER OF SECURITIES WITH DEPOSITORY: Every depository shall on the receipt of intimation from a participant, register the transfer of security in the name of the transferee.
If a beneficial owner or a transferee of any security seeks to have custody of such security, the depository shall inform the issuer accordingly.
5. OPTIONS TO RECEIVE SECURITY CERTIFICATE OR HOLD SECURITIES WITH DEPOSITORY: Every depository shall on receipt of intimation from a participant, register the transfer of security in the name of the transferee.
Where person opts to hold a security with the depository, the issuer shall intimate such depository the details of allotment of security and receipt of such information shall enter in the records of the depository.
6. SECURITIES IN DEPOSITORIES IN FUNGIBLE FORM: All the securities held by the depository shall be in the fungible or dematerialized form which is an electronic mode to keep the records of the securities.
7. RIGHTS OF DEPOSITORIES AND BENEFICIAL OWNER: Depository has the right to act as deemed registered owner of the security for the purpose of transfer of ownership of security on behalf of beneficial owner.
Depository shall not have any voting rights as a registered owner on behalf of beneficial owner. Beneficial owner shall be entitled to all the rights and benefits and subject to all liabilities in respect of his securities held by depository.
8. REGISTER OF BENEFICIAL OWNER: Every depository shall maintain a register and index of beneficial owners in the manner provided in Section 150,151 and 152 of the Companies Act,2013.
9. PLEDGE OR HYPOTHECATION OF SECURITIES HELD IN DEPOSITORY: In case approval is granted by the owner to the depository regarding pledge of securities, he can hypothecate the security.
Beneficial owner shall give intimation of such pledge to the depository and then depository make entries in its records accordingly.
10. FURNISHING OF INFORMATION AND RECORDS BY DEPOSITORY AND ISSUER: Every depositor shall furnish to the issuer the information about the transfer of securities in the name of beneficial owners.
Every issuer shall make available to the depository copies of the relevant records in respect of securities held by such depository.
11. OPTION TO OPT OUT IN RESPECT OF ANY SECURITY: If a beneficial owner seeks to opt out of a depository in respect of any security, he shall inform the depository accordingly. The depository shall on receipt of intimation make appropriate enteries in its records and shall inform the issuer.
Every issuer shall grant the certificate of security to the beneficial owner within the 30 days of intimation received from the depository provided that all the conditions are fulfilled and fees is provided.
12. DEPOSITORY TO INDEMNIFY LOSS IN CERTAIN CASES: Any loss caused to the beneficial owner due to the negligence of the depository of the participant, the depository shall indemnify such loss to the beneficial owner.
Where the loss due to the negligence of the participant is indemnified by the depository, shall have the right to recover the same from the participant.
13. RIGHTS AND OBLIGATIONS OF DEPOSITORIES, ETC.: The rights and obligations of depositories, participants and the issuers whose securities are dealt with by a depository shall be specified by the regulations.
The eligibility criteria for admission of securities into the depository shall be specified by the regulations.