Q: What is dematerialisation?
A:
Dematerialisation is the process of converting physical certificates into electronic
format.
Q: Why do we need to dematerialise our shares? What
are the benefits?
A: Physical shares require administrative bandwidth to maintain proper records. Physical shares also incur expenses associated with paper for certificate, printing of certificate and distribution of certificates to investors. After investing time and money, physical certificates are still at risk of duplication, damages, loss & theft, etc.
A: Physical shares require administrative bandwidth to maintain proper records. Physical shares also incur expenses associated with paper for certificate, printing of certificate and distribution of certificates to investors. After investing time and money, physical certificates are still at risk of duplication, damages, loss & theft, etc.
Dematerialisation
solves these problems and also provides benefits like:
●
Improvement in corporate governance and increased transparency in the shareholding
structure
●
Lowers costs
related to printing and distribution of shares to investors
●
Easy transfer of funds - electronically facilitation of corporate actions like
buyback, dividend payment, etc. as an investor’s demat account can be linked to
their bank account.
●
Effective communication: DPs sends SMS regarding transactions and
modifications in account details to the mobile number registered in the demat
account.
Q: How much do the portfolio company will have to pay?
A: Charge for the
first year will be Rs33,100 /- + GST for any company that has ordinary
equity shares and single class of preferential shares with nominal value of
admitted security less than Rs2.5cr. The company will also need to deposit a
security deposit equivalent to two years of annual custodial fees (starting
Rs10,000) with the Depository participant.
Q: Is there a recurring charge to be paid by the
portfolio company?
A: Recurring
charge are to be paid to Depository participant (DP) and Registrar and share
transfer agent (RTA) and will be Rs12,500/- + GST per annum for any company
that has equity shares and single class of preferential shares with nominal
value of admitted security less than Rs2.5cr.
●
Annual
maintenance charges/ custodial charges to be paid to DP:
Nominal value of admitted securities
|
Annual Custodial Charges + applicable taxes (Rs)
|
Upto Rs2.5 crore
|
5,000
|
Above Rs2.5 crore and upto Rs5 crore
|
9,000
|
Above Rs5 crore and upto Rs10 crore
|
22,500
|
Above Rs10 crore and upto Rs20 crore
|
45,000
|
Above Rs20 crore
|
75,000
|
●
Annual recurring
charges to be paid to RTA
○
For ordinary
equity shares: Annual maintenance
fees of Rs. 5,000/- + GST per ISIN would be charged up to 100 shareholders.
○
Preference shares: Annual maintenance fees of Rs 2,500/- + GST per ISIN would be charged
up to 100 shareholders.
Q: Will this eliminate our requirement to collect
physical shares in the next round?
A: Yes, new
shares issues and transfers will be done electronically and directly in the
investor’s demat account.
Q: What is an ISIN?
A: ISIN
(International Securities Identification Number) is a unique 12 digit alphanumeric
identification
number allotted for security. Equity fully paid up, equity‐partly paid up,
equity with differential voting /dividend rights issued by the same issuer will
have different ISINs.
Q: Who are the parties involved in getting ISIN and
demat?
A: The
process involves the Depository participant (DP), Register and share agent
(RTA), Mumbai Angels, the company, and investors.
Q: Who is a depository participant? What are different
types of depositories?
A: A
depository is responsible for holding the securities of a shareholder in the
electronic
form. These
securities could be in the form of bonds, government securities and mutual
fund units, which
are held by a registered Depository Participant (DP). Currently there are
two Depositories
registered with SEBI:
• National
Securities Depository Limited (NSDL) and the other
• Central Depository
Service (India) Limited (CDSL).
Q: Who is a Registrar and Transfer Agent (RTA)?
A: An RTA is
an agent of the issuer. RTA acts as an intermediary between the issuer and
depository for
providing services such as dematerialization, rematerialization, initial
public offers (IPO)
and corporate actions.
Q: What is the process?
A: The process to get shares in demat account can be divided into two sub-process:
●
Process for the company: Getting ISIN for securities
○
The company will
have to submit a list of documents (details in annex) and fees to get its
securities (ordinary equity, preference shares, etc.) admitted to the
Depository participant.
○
Depository
participant after verifying the documents will issue ISIN (International
Securities Identification Number) for each type of security.
●
Process for the investor to convert physical share to
demat
○
After issuance of
ISIN, the Investors will have to submit completed Dematerialisation Request
Form (DRF) along with their physical share certificates to the Depository
participant.
○
Depository
participant then send DRF to the RTA to verify details and convert physical
shares to electronic form.
Q: How long does the process take?
A: Process
for getting ISIN for securities will take 15-30 days based on readiness of
paperwork while converting physical shares to electronic form will take 7-14
days.
Q: What happens to the physical certificates after
they are dematerialized?
A: After
dematerialization, physical certificates may be retained / destroyed by the
Issuer /
RTA.
Q: Where is Dematerialisation Request Form DRF
available?
A:
Dematerialisation Request Form (DRF) are available with the Depository
participant and can be accessed online at link to DRF from at CDSL.
Q: What are the components of the charges?
A: Fee
comprises one-time joining fees and annual maintenance fee and is payable to
Depository participant (DP), Register and share agent (RTA), and Mumbai Angels.
●
One-time fee is
payable DP, RTA, and Mumbai Angels
●
Annual
maintenance fee is payable to depository DP and RTA
Q: How much do we pay to the Depository participant?
A: Fee
payable to Depository participant are given below:
●
One time
processing fee of Rs15,000/- + applicable taxes per company
●
One-time fee of
Rs600/- per company for Tripartite agreement (for franking and e-stamping / on
stamp paper)
●
Annual
maintenance charges/ custodial charges:
Nominal value of admitted securities
|
Annual Custodial Charges + applicable taxes (Rs)
|
Upto Rs2.5 crore
|
5,000
|
Above Rs2.5 crore and upto Rs5 crore
|
9,000
|
Above Rs5 crore and upto Rs10 crore
|
22,500
|
Above Rs10 crore and upto Rs20 crore
|
45,000
|
Above Rs20 crore
|
75,000
|
●
The company will
also be required to maintain a security deposit of not less than two years
annual custodial fees (given in the above table) with the Depository
participant.
Q: How much does the Register and share agent (RTA)
charge?
A: Fee to be
paid to RTA depends upon the number and type of securities to be admitted by
the company i.e. ordinary shares, preferential shares, etc.
For ordinary equity shares:
●
Annual
maintenance fees of Rs. 5,000/- + GST per ISIN would be charged up to 100
shareholders.
●
Corporate action
charges will be Rs. 1,000/- + GST per Corporate Action for allotment &
issue of fresh securities.
●
Reimbursement of
expenses on an actual basis ( like courier, postage, CD ROMs, Labor charges,
binding, sealing conveyance and travel, courier etc.)
Preference shares:
●
Annual
maintenance fees of Rs 2,500/- + GST per ISIN would be charged up to 100
shareholders.
●
Corporate action
charges will be Rs 1,000/- + GST per Corporate Action for allotment, issue
& redemption/conversion of securities.
●
Reimbursement of
expenses on an actual basis ( like courier, postage, CD ROMs, Labor charges,
binding, sealing conveyance and travel, courier etc.).
●
Preference shares
having different maturity dates are classified as different securities and ISIN
needs to issued for each type of preferential shares.
Q: How much does Mumbai Angels Network charge?
A: Mumbai Angels
Network will charge one-time processing fees of Rs 5,000/- + GST per company.
The charge is to compensate Mumbai Angels for time and effort for Mumbai Angels
in driving this initiative and support through the process.
Q: Can we bypass RTA and directly engage with
Depository participants?
A:
Technically Yes, RTA can be bypassed but the company will have to obtain direct
in-house connectivity with Depository participants which requires significant
investment.
The company will
have to procure computer hardware as per the configuration specified by CDSL
and would have to register itself with CDSL and submit requisite documents.
CDSL's system is based on centralised database architecture with on-line
connectivity with RTAs. Because of this centralisation, the cost for setting up
RTA connectivity is significantly less without compromising in any manner on
security and safety of the system. RTAs also need not incur high recurring
costs in terms of maintaining back-ups and the related data storage. These
advantages provide the wherewithal to RTAs to offer services to issuer
companies at a significantly lower cost.
Q: Do we
require a different demat account for every security issued?
A: Single
demat account with CDSL (Central Depository Services (India) Limited) will be
required for all the dematerialised shares of Mumbai Angels Network invested
companies.
Q: Do dematerialized securities have certificate
number, distinctive range number or
certificate numbers?
A: No.
Dematerialized securities do not have any of the numbers mentioned above.
Securities held in demat form are fungible, which means that any share of an
ISIN is similar to any other share of that ISIN.
Q: Can electronic holdings be converted back in physical
certificate form?
A: Yes. It
can be done through Rematerialisation, which is the process of converting
electronic holdings back into physical certificates.
Q: Is it compulsory to mention the ISIN of the
security while filling up the DRF?
A: Yes. The
ISIN of the security should be mentioned in the DRF, to ensure that the correct
security is
dematerialized. ISIN can also be be obtained from the DP or from CDSL’s
website, www.cdslindia.com and NSDL’s website, www.nsdl.co.in
Q: Who is the registered owner of Securities?
A: When
securities of a company are held in physical form by an investor, his/ her name
is
recorded in the
books of the company as a ‘Registered Owner’ of the securities. When physical
shares are converted into electronic form, the depository becomes ‘Registered
owner” in the books of the company and investor’s name is removed from books of
the company.
Q: Can a demat account be opened in the name of Joint
Holders?
A: Yes. A
demat account can be opened in a single name or in joint holders’ name. There
can be maximum three account holders i.e. one main holder and two joint holder
Q: What are the list of documents required?
A: Following
documents and forms are required. RTA and Mumbai Angles will help you in
filling required forms and guide in getting other required documents.
1. Master Creation Form (Each & every page of the MCF should be on the letter head of the
Company along with Company rubber stamp & signature of the Co Official )
2. Certified copy
of Certificate of Incorporation
3. Soft copy of security details on letter head
of Company (Format to be provided by RTA)
4. Board Resolution along with Specimen Signature (Format to
be provided by RTA)
5. Undertaking-cum-Indemnity on letter Head of
Company (Format to be provided by RTA)
6. Letter for freezing/unfreezing of securities on letter head of company
7. Certified copy of TAN & GST Certificate
8. Certified copy of the Memorandum of Association
& Articles of Association
9. Certified copy of Annual report for last financial
year
10. Net worth Certificate (Format to be provided by
RTA)
11. Tripartite agreement (Format to be provided
by RTA)
Important
Instructions for executing Tripartite Agreement:
1. Agreements should be executed on the stamp
paper/franking of Rs. 600/-.
2. All pages of the agreement should be stamped and
signed by Issuer and RTA.
3. Name and signature of the witness (Issuer and RTA)
should be present on the last page of the Agreement.
4.
You are required
to send the 1 Original + 2 Photo Copies of the Tripartite Agreement ,
duly stamped and signed in Original by both Issuer and RTA.
Frequently Asked Questions
- Why do we need to dematerialise our
shares?
- What is the process?
- What are the components of charges?
- How much do we have to pay to the
Depository Participant? (give full form for both)
- How much does the RTA Charge?
- How much does Mumbai Angels Network
Charge?
- What is the overall range of
charges?
- Is there a recurring charge every
year?
- Do we require a different demat
account for every security issued?
- How long does the process take?
- Will this eliminate our requirement
to collect physical shares in the next round?
Q: What are the benefits of availing depository
services?
A: The
benefits are enumerated below:‐
o A safe and convenient way to hold securities;
o Immediate transfer of securities;
o No stamp duty on transfer of securities;
o Elimination of risks associated with physical
certificates such as bad delivery, fake
securities, delays, thefts etc.
o Reduction in paperwork involved in transfer of
securities;
o Reduction in transaction cost;
o No odd lot problem, even one share can be traded;
o Nomination facility;
o Change in address recorded with DP gets registered
with all companies in which investor
holds securities electronically eliminating the need
to correspond with each of them
separately;
o Transmission of securities is done by DP eliminating
correspondence with companies;
o Automatic credit into demat account of shares,
arising out of
bonus/split/consolidation/merger etc;
o Holding investments in equity and debt instruments
in a single account.
Details of fees:
Fee comprises of one
time joining fees and annual maintenance charge payable to DP, RTA and Mumbai
Angels:
DP charges:
●
Non-refundable one time processing fee of Rs15,000/- +
applicable taxes per company
●
One-time fee of Rs 600 per company for Tripartite (for franking and e-stamping / on stamp paper) or
bi-partite (for franking and e-stamping / on stamp paper) and (In House RTA
Declaration ) agreement.
●
Annual custodial Charges:
Nominal
value of admitted securities (Rs)
|
Annual
Custodial Charges payable by an Issuer to CDSL (Rs) (+ applicable taxes)
|
Upto
2.5 crore
|
5,000
|
Above
2.5 crore and upto 5 crore
|
9,000
|
Above
5 crore and upto 10 crore
|
22,500
|
Above
10 crore and upto 20 crore
|
45,000
|
Above
20 crore
|
75,000
|
4) Security Deposit:
The company has to maintain security deposit of not less than two years annual
custodial fees.
RTA charges:
For ordinary equity shares:
●
Annual
maintenance fees of Rs. 5,000/- per ISIN would be charged up to 25
shareholders.
●
Corporate
action charges will be Rs. 1,000/- per Corporate Action for allotment &
issue of fresh securities.
●
Reimbursement
of expenses incurred such as courier, postage, computer stationery, floppies,
CD ROMs, Labor charges, binding, sealing conveyance and travel, courier etc.
will be charged on actual basis
Preference shares:
●
Annual maintenance fees of Rs 2,500/- per ISIN would be
charged up to 15 shareholders.
●
Corporate action charges will be Rs 1,000/- per Corporate
Action for allotment, issue & redemption/conversion of securities.
●
Reimbursement
of expenses incurred such as courier, postage, computer stationery, floppies,
CD ROMs, Labor charges, binding, sealing conveyance and travel, courier etc.
will be charged on actual basis
Mumbai Angels:
Annual maintenance
fee of Rs 5,000/- per company.
*all the above
charges will attract respective GST.
List of documents required:
12. Master Creation Form (Each & every page of the MCF should be
on the letter head of the Company along with Company rubber stamp &
signature of the Co Official )
13. Certified copy of Certificate of
Incorporation
14. Soft copy of security details on letter
head of Company (Format to be provided by RTA)
15. Board Resolution along with Specimen Signature
(Format to be provided by RTA)
16. Undertaking-cum-Indemnity on letter Head
of Company (Format to be provided by RTA)
17. Letter for freezing/unfreezing of securities on letter head of company
18. Certified copy of TAN & GST
Certificate
19. Certified copy of the Memorandum of
Association & Articles of Association
20. Certified copy of Annual report for last
financial year
21. Net worth Certificate (Format to be
provided by RTA)
22.
Tripartite agreement (Format to be provided by
RTA)
Important
Instructions for executing Tripartite Agreement:
5. Agreements should be executed on the stamp
paper/franking of Rs. 600/-.
6. All pages of the agreement should be
stamped and signed by Issuer and RTA.
7. Name and signature of the witness (Issuer
and RTA) should be present on the last page of
the Agreement.
8.
You
are required to send the 1 Original + 2 Photo Copies of the Tripartite
Agreement , duly stamped and signed in Original by both Issuer and RTA.
MA Network’s Portfolio Team will support the company
through the entire demat process to ensure smooth transition from paper to
electronic shares
