SEBI propose to mandate issuance of new securities in demat form after stock split
SEBI recently released a consultation paper proposing to mandate listed companies to issue securities only in demat form following stock split, consolidation of face value of shares, and merger or demerger. In case an investor does not have a demat account, the issuer companies will be required to open a separate demat account with a suitable ledger of ownership or suspense escrow account for dealing with such securities.
Dematerialisation of securities has several benefits, including reduction of frauds and forgery, elimination of loss and damage of securities, faster and more efficient transfers, improved transparency and regulatory oversight, mitigation of legal disputes, cost reduction of investors and companies, etc. Although it is legally permissible to hold securities in physical form, an investor can sell or transfer such securities only after dematerialising these securities.
Accordingly, to progress towards greater dematerialisation of securities and to prevent fresh creation of physical securities by listed entities, it is proposed that the existing security certificates are converted into demat form and no new physical security certificates are created. To make the proposals effective, SEBI has also proposed modifications to certain provisions of the LODR (Listing Obligations and Disclosure Requirements) norms.
Stakeholders may submit comments by 4th February, 2025.
