SPECIAL RESOLUTION FOR ALTERATION OF ARTICLES OF ASSOCIATION OF THE COMPANY TO INCLUDE AN ARTICLE AUTHORISING THE COMPANY TO HAVE ITS SECURITIES DEMATERIALISED
“RESOLVED THAT pursuant to Section 14 of the Companies Act, 2013, the articles of association of the company be and are hereby altered in the following manner:
After article No…, the following be inserted as article … :
Article … Dematerialization of Securities
For the purpose of this article:-
‘Beneficial Owner’ means a person or persons whose name is recorded as such with a depository. ‘SEBI’ means the Securities and Exchange Board of India.
‘Depository’ means a company formed and registered under the Companies Act, 2013, and which has been granted a certificate of registration to act as a depository under the Securities and Exchange Board of India Act,
‘Security’ means such security as may be specified by SEBI from time to time.
B. Dematerialisation of Securities
Notwithstanding anything contained in these articles, the company shall be entitled to dematerialise its securities and to offer securities in a dematerialised form pursuant to the Depositories Act, 1996.
C. Options for investors
Every person subscribing to securities offered by the company shall have the option to receive security certificates or to hold the securities with a depository. Such a person who is the beneficial owner of the securities can at any time opt out of a depository, if permitted by the applicable law in respect of any security in the manner provided by the Depositories Act, 1996 and the company shall, in the manner and within the time prescribed, issue to the beneficial owner the required certificates of securities.
If a person opts to hold his security with a depository, the company shall intimate such depository the details of allotment of the security and/or transfer of securities in his name and on receipt of the information, the depository shall enter in its record the name of the allottee and/or transferee as the beneficial owner of the security.
D. Securities in Depositories to be in Fungible Form
All securities held by a depository shall be dematerialised and be in fungible form. Nothing contained in Sections
89 and 186 of the Act shall apply to a depository in respect of the securities held by it on behalf of the beneficial owners.
E. Distinctive Numbers of Securities held in a Depository
Nothing contained in the Act or these articles regarding the necessity of having distinctive numbers for securities issued by the company shall apply to securities held with a depository.
F. Rights of Depositories and Beneficial Owners
(i) Notwithstanding anything to the contrary contained in the Act or these articles, a depository shall be deemed to be the registered owner for the purposes of effecting transfer of ownership of security on behalf of the beneficial owner.
(ii) Save as otherwise provided in (a) above, the depository as the registered owner of the securities shall not have any voting rights or any other rights in respect of the securities held by it.
(iii) Every person holding securities of the company and whose name is entered as the beneficial owner in the records of the depository shall be deemed to be a member of the company. The beneficial owner of securities shall be entitled to all the rights and benefits and be subject to all the liabilities in respect of his securities which are held by a depository.
G. Service of Documents
Notwithstanding anything to the contrary contained in the Act or these articles, where securities are held in a depository, the records of the beneficial ownership may be served by such depository on the company by means of electronic mode or by delivery of floppies or discs.
H. Transfer of Securities
Nothing contained in Section 108 of the Act or these articles shall apply to a transfer of securities effected by a transferor and transferee both of whom are entered as beneficial owners in the records of a depository.
I. Allotment of Securities Dealt in a Depository
Notwithstanding anything contained in the Act or these articles, where securities are dealt in a depository, the company shall intimate the details thereof to the depository immediately on allotment and/or registration of transfer of such securities.
J. Register and Index of Beneficial Owners
The register and index of beneficial owners maintained by a depository under the Depositories Act, 1996, shall be deemed to be the register and index of members and security holders for the purposes of these articles.”
With the enactment of the Depositories Act, 1996, and coming into operation of the depository system, some of the provisions of the Companies Act, 2013, relating to the issue, holding, transfer, transmission of equity shares and other securities of companies have been amended to facilitate the implementation of the depository system.
The depository system of holding securities in an electronic mode is a far safer and more convenient method of securing, holding and trading in the securities of a company.
Under the depository system, the securities can be dematerialised. The company intends joining a depository. It is, therefore, proposed that the company’s articles of association be suitably altered, as set out in the proposed resolution to enable it to dematerialise its securities. The resolution contains (i) definitions of some of the important terms used in the system; (ii) dematerialisation of securities; (iii) options for investors; (iv) securities in depositories to be in fungible form; (v) distinctive numbers of securities held in a depository; (vi) rights of depositories and beneficial owners; (vii) service of documents; (viii) transfer of securities; (ix) allotment of securities dealt in a depository; and (x) register and index of beneficial owners.
None of the directors of the company is concerned or interested in the proposed resolution except to the extent of the shareholdings of the directors.