22 June 2018

SEBI LODR AMENDMENT | SHARES IN LISTED COMPANIES TO BE HELD ONLY IN DEMAT FORM.

 The Securities and Exchange Board of India (``SEBI``) has recently notified the fourth amendment (``Amendment``) to the SEBI Listing Obligations and Disclosure Requirements Regulations, 2015 (``LODR Regulations``). By these amendments, SEBI has prohibited the transfer of securities in physical form of listed companies. The amendments were notified on 8 June 2018 and will come into effect from 5 December 2018. Earlier, only members of the promoter group were required to hold their securities in demat form. However, this requirement would now be applicable to public shareholders as well.

The Amendment primarily applies to Regulation 40(1) of the LODR Regulations and the change in the Regulation is set out below:

Pre-amendment: Prior to the Amendment Regulation 40(1) of the LODR Regulations read as follows:

``Save as otherwise specified in provisions of securities laws or Companies Act, 2013 and rules made thereunder, the listed entity shall also comply with the requirements as specified in this regulation for effecting transfer of securities``

Post amendment: After the Amendment, Regulation 40(1) reads as follows:

``Save as otherwise specified in provisions of securities laws or Companies Act, 2013 and rules made thereunder, the listed entity shall also comply with the requirements as specified in this regulation for effecting transfer of securities``

``Provided that, except in case of transmission or transposition of securities, requests for effecting transfer of securities shall not be processed unless the securities are held in the dematerialized form with a depository.``

Therefore, all transfers of securities in listed companies post 5 December 2018 can only be done if the securities are held in demat form. However this stipulation will not apply to securities which are transmitted to legal heirs of deceased holders or transposition of securities.


MHCO COMMENT: It is advisable to convert all existing securities in physical form of listed companies to demat form before 5 December 2018 in order to trade in these securities.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance