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THE DEPOSITORIES ACT 1996

2017-07-14 10:31:15
THE DEPOSITORIES ACT 1996

KEY FEATURES OF THE ACT:

·         The Depository must be a company registered under the Companies Act, and a Certificate of Registration by SEBI.

·         Commencement of business only after obtaining Certificate from SEBI

·         Requires “Participants” registered under the SEBI Act

·         Depository and Participant must enter into an Agreement, and a person wising to avail Depository services must enter into the necessary agreement through a Participant

·         Certificate of Security to be surrendered to Issuer, and the same to be cancelled; and the Depository to be substituted as the registered owner, in records; the person will become Beneficial Owner in the Depository’s records

·         Transfer of securities to be registered with the Depository

·         Every subscriber to a security has an option to receive the Certificate or maintain it with Depository

·         Rights and liabilities of demat securities also lie with the Beneficial Owner

·         Securities held in Depository can be pledged or hypothecated

·         Information of transfer of securities, to be communicated between the Depository and Issuer

·         Beneficial Owner has option to opt out of depository

·         Liability to indemnify loss to Beneficial Owner, by negligence of Depository

·         SEBI has power of enquiry over securities held in Depositories, to give directions.

·         Specifies Penalties to persons or companies contravening provisions of the Act

·         Central Govt has the power to grant immunity from prosecution to any person, for violation of provisions of the Act

·         Provision to appeal to the Central Govt and the Securities Appellate Tribunal, and to the Supreme Court

·         Depositories can make their own bye-laws with the previous approval of the Board

 

BENEFITS OF DEPOSITORIES                                                                                                                          

·         Less risk of loss or wear and tear

·         Easier for safekeeping

·         Easier transfer

·         Better monitoring by SEBI

·         Reduced transaction costs, etc.

 

MAJOR CASE LAWS (INDIAN KANOON)

·         Probir Kumar Misra v. Ramani Ramaswamy

·         Northern Projects Ltd. v. Blue Coast Hotels and Resorts Ltd

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