CONCEPTS AND PROCEDURE
Payment of Dividend
The dividend is paid under two modes viz.-
- Electronic Clearing Service (ECS) and through Direct Credit
- Payment by mailing dividend warrants
Payment of dividend through Electronic Clearing Service (ECS) facility and through Direct Credit
What is payment of dividend through ECS Facility and how does it operate?
Reserve Bank of India’s ECS facility provides investors an option to receive dividend/ interest directly in their bank accounts rather than receiving the same through post. Under this option, investor’s bank account is directly credited and an advice thereof is issued by the Company after the transaction is effected. The concerned bank branch credits investor’s account and indicates the credit entry as “ECS” in his/ her passbook/ statement of account. If any investor maintains more than one bank account, payment can be received at any one of his/ her accounts as per the preference of the investor. The investor does not have to open a new bank account for the purpose.
What is payment of dividend through Direct Credit and how does it operate?
The Company will be appointing one bank as its Dividend banker for distribution of dividend. The said banker will carry out direct credit to those investors who are maintaining bank account with the said bank, provided the bank account details are registered with the DP for dematerialised shares and/ or registered with the R&TA prior to the payment of dividend for shares held in physical form.
How to avail of ECS Facility?
Investors holding shares in physical form may send their ECS Mandate, duly filled in, to the Company’s R&TA.
However if shares are held in dematerialised from, ECS mandate has to be sent to the concerned Depository Participant (DP) directly, in the format prescribed by the DP.
Can ECS Facility be opted out by investors?
Investors have a right to opt out from this mode of payment by giving an advance notice of four weeks, prior to payment of dividend, either to the Company’s R&TA or to the concerned DP, as the case may be.
How to register a request for obtaining payment through ECS for the shares held in dematerialised form?
The investor should approach the DP and submit a request letter to the DP along with a copy of the cancelled cheque of the investor’s bank account. The DP in turn will record the 9 digit MICR number along with the account particulars of the investor. This action would facilitate future payment of dividend, etc. to be received in electronic mode.
Course of action in case of Non-receipt of Dividend, Revalidation of Dividend Warrant, etc.
What should a shareholder do in case of non-receipt of dividend?
Shareholders may write the Company’s R&TA, furnishing the particulars of the dividend not received, and quoting the folio number/ DPID and Client ID particulars (in case of dematerialised shares). The R&TA shall check the records and issue duplicate dividend warrant if the dividend remains unpaid in the records of the Company after expiry of the validity period of the warrant which is normally three months from the date of its issue. If the validity period of the lost dividend warrant has not expired, shareholders will have to wait till the expiry date since duplicate warrant cannot be issued during the validity of the original warrant. On expiry of the validity period, if the dividend warrant is still shown as unpaid in records of the Company, duplicate warrants will be issued. The R&TA would request the concerned shareholder to execute an indemnity before issuing the duplicate warrant.
However, duplicate warrants will not be issued against those shares wherein a ‘Stop Transfer Indicator’ has been instituted either by virtue of a complaint or by law, unless the procedure for releasing the same has been completed.
No duplicate warrant will be issued in respect of dividends which have remained unpaid/ unclaimed for a period of 7 years in the unpaid dividend account of the Company as they are required to be transferred to the Investor Education and Protection Fund (IEPF) constituted by Central Government.
What is the procedure for revalidation of dividend warrants?
Shareholders who have not encased their dividend warrants within the validity period may send their request of revalidation to the Company’s R&TA enclosing the said dividend warrants. The Company’s R&TA will after due verification of the records, issue a revalidated dividend warrant. The revalidated warrants will be valid for a period not exceeding 3 months from the date of such warrant.
Dematerialisation of Shares
What is dematerialisation of shares?
Dematerialisation (DEMAT) is the process by which securities held in physical form are cancelled and destroyed and the ownership thereof is entered into and retained in a fungible form on a depository by way of electronic balances. Trading in demat form is regulated by the Depositories Act, 1996 and is monitored by the SEBI. The two depositories functioning are NSDL & CDSL.
How to dematerialise shares?
The procedure for dematerialising shares is as under:
Open Beneficiary Account with a Depository Participant (DP) registered with SEBI.
Submit Demat Request Form (DRF) as given by the DP, duly signed by all the holders with the names and signatures in the same order as appearing in the concerned certificate(s) and the Company records.
Obtain acknowledgement from the DP on handing over the share certificate(s) along with the DRF.
Demat confirmations are required to be completed in 21 days as against 30 days (excluding time for despatch) for physical transfer.
Receive a confirmation statement of holdings from the DP. Statement of holdings is sent by the DPs from time to time. Presently, confirmation is given by DPs on an enabling basis through email or SMS facilities, thus enabling shareholders to further trade in securities immediately.
Rematerialisation of Shares
What is rematerialisation of shares?
It is the process through which shares held in Demat form are converted into physical form by issuance of share certificate(s)
How to rematerialise shares?
The procedure for rematerialising shares is as under:
Shareholders should submit duly filled in Rematerialisation Request Form (RRF) to the concerned DP.
DP intimates relevant Depository of the request through the system.
DP submits RRF to the Company’s R&TA
Depository confirms rematerialisation request to the Company’s R&TA
The Company’s R&TA updates accounts and prints certificate(s) and informs the Depository.
Depository updates the Beneficiary Account of the shareholder by deleting the shares so rematerialised.
Share certificate (s) is dispatched to the shareholder.
What is nomination facility and to whom it is more useful? What is the procedure of appointing a nominee?
Section 109A of the Companies Act, 1956 provides the facility of nomination to shareholders. This facility is mainly useful for individuals holding of shares in sole name. in case of joint shareholding by individuals, nomination will be effective only in the event of the death of all joint shareholders. Investors, especially those who are holding shares in single name, are advised to avail of the same by submitting the prescribed Form 2B to the Company's R&TA.
However, if shares are held in demat form, nomination has to be registered with the concerned DP directly, as per the format prescribed by the DP.
Who can appoint nominee and who can be appointed as a nominee?
Individual shareholders holding the shares/ debentures in single name or joint names can appoint a nominee. In case of joint holding, joint holders together have to appoint the nominee. While an individual can be appointed as nominee, a trust, society, body corporate, partnership firm, karta of HUF or a power of attorney holder will not be nominee(s). Minors can, however, be appointed as a nominee.
Transfer of Shares
- Transferee (s) need to send share certificate(s) along with the share transfer deed in the prescribed Form 7B, duly filled in, executed and affixed with share transfer stamps, to the Company’s R&TA. The statutory time limit fixed for completing a transfer is one month under the Listing Agreement and two months under the Companies Act, 1956. The Government of India, Ministry of Finance, Department of Revenue, has fixed the Stamp Duty on transfer (whether with or without consideration) of shares at the rate of 0.25 paise for every Rs. 100 or part thereof of the market value of the shares on the date of execution of the transfer deed. The transfer deed is valid for a period of one year from the date of presentation or till the book closure date, whichever is later. In case the transfer deed has expired, the holder may approach the Registrar of Companies to get the same revalidated.
- In case of Dematerialised shares, the shares are credited to the purchaser’s account by the respective Depository Participant under the directions of the concerned Depository. Presently, transfer of dematerialised shares does not attract stamp duty.
- In case of transfer of shares by Non-Resident in addition to the normal procedure for transfer of shares, prior approval of the Reserve Bank of India is required to be obtained by the Non-Resident Investor(s).
Transmission of Shares
- In case of a deceased shareholder who held shares in his/ her own name (single) and had left a Will, the legal heir (s) will have to get the Will probated by the Court of competent jurisdiction and then send to the Company’s R&TA a copy of the probated Will, along with relevant details of the shares and the relevant share certificate(s) in original.
- In case the share holder dies intestate (without a Will), the heirs will have to get the succession certificate from the Court of competent jurisdiction and then send to the Company’s R&TA a copy of the Succession Certificate, alongwith an attested copy of Death Certificate, relevant details of the shares and share certificate(s) in original.
Transposition of Names (Change in Order of Names)
Share certificates along with a request letter duly signed by all the joint holders may be sent to the Company’s R&TA for change in order of names, known as ‘transposition’. Transposition can be done only for the entire holdings under a folio and therefore, requests for transposition of part holding cannot be accepted by the Company/ R&TA. For shares held in demat form, investors are advised to approach their DP concerned for transposition of the shares the Company.
Issue of Duplicate Share Certificate in case of loss/ misplacement of original share certificate
- Shareholders who have lost/ misplaced share certificate(s) should inform the Company’s R&TA, immediately about loss of share certificate(s), quoting their folio number and details of share certificate(s), if available. The R&TA shall immediately mark a copy ‘stop transfer’ on the folio to prevent any further transfer of shares covered by the lost share certificate(s). It is recommended that the shareholders should lodge a FIR with the police regarding loss of share certificate(s). They should send their request for duplicate share certificate(s) to the Company’s R&TA. Documents required to be submitted along with the application include Indemnity Bond, Surety Form, copy of FIR, Memorandum of Association and Certified True copy of the Board Resolution (in case of companies).
- In case a shareholder finds the original share certificate(s) after receipt of duplicate share certificate(s), he is requested to surrender the original share certificate(s), after cancellation, to the Company’s R&TA immediately, if the duplicate share certificate(s) have been issued to him/ her. Further, as the shareholder has been issued duplicate share certificate(s), he/she would be liable to indemnify any innocent third party (ies) purchasing the original share certificate(s), directly/ indirectly, with or without the knowledge of the original shareholder, as it tantamounts to passing of adverse title.
Splitting of Share Certificate into Smaller Lots
Shareholders may write to the Company’s R&TA enclosing the relevant share certificate for splitting into smaller lots. The share certificates, after splitting, will be sent by the Company’s R&TA to the shareholders at their registered address.
Consolidation of Share Certificates
- Consolidation of share certificates helps in saving costs in the event of dematerialising shares and also provides convenience in holding the shares physically. Shareholders having various denominations under the same folio should send all the certificates to Company’s R&TA for consolidation of all the shares into a single certificate.
- If the shares are not under the same folio but have the same order of names, the shareholder should write to Company’s R&TA for the prescribed form for consolidation of folios. This will help the investors to efficiently monitor the holding and receivable thereon.
Change of Address
Shareholders holding shares in physical form, may send a request letter duly signed by all the holders giving the new address along with Pin Code. Shareholders are also requested to quote their folio number and furnish proof such as attested copies of Ration Card/ Passport/ Latest Electricity Bill/ telephone Bill/ Lease Agreement, etc. If shares are held in dematerialised form, information about change in address needs to be sent to the DP concerned.
Change of Name
Shareholders may send the original share certificate(s) along with the supporting documents like marriage certificate, court order, etc. to the Company’s R&TA. The Company’s R&TA, after verification will effect change of name and send the share certificate(s) in the new name of the shareholder (s). Shareholders holding shares in demat form, may request the concerned DP in the format prescribed by the DP.
Authority to another person to deal with shares
Shareholders need to execute a Power of Attorney in favor of the concerned person and submit a notarised copy of the same to the Company’s R&TA. After scrutiny of the documents, the R&TA shall register the Power of Attorney and inform the shareholders concerned about the registration number of the same. Whenever a transaction is done by the Power of Attorney holder this registration number should be quoted in the communication