The Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2019 made it mandatory for all unlisted public companies to file Form PAS-6 on a half-yearly basis, even if there is no change in the share capital of the company during that period.
As per Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014, every unlisted public company is required to submit a Reconciliation of Share Capital Audit Report (Form PAS-6) to the Registrar of Companies (RoC) on a half-yearly basis.
This rule was amended vide the Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2019 with effect from 30th September 2019 and under Section 29(1) of the Companies Act, 2013 where mandates that every company making a public offer and such other class or classes of companies as may be prescribed shall issue securities only in dematerialized form by complying with the provisions of the Depositories Act, 1996, and the regulations made thereunder.
As per Rule 9A(5) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, every unlisted public company making any offer for the issue of any securities, or buyback of securities, or issue of bonus shares, or rights offer or transfer shall ensure that before making such offer, the entire holding of securities of its promoters, directors, and key managerial personnel has been dematerialized in accordance with the provisions of the Depositories Act, 1996 and the regulations made thereunder.
This requirement is aimed at ensuring that the securities holdings of the promoters, directors, and key managerial personnel of unlisted public companies are held in a dematerialized form, thereby promoting transparency, efficiency, and investor protection. Dematerialization of securities eliminates the risks associated with physical certificates, such as loss, theft, forgery, and damage. It also helps to prevent fraud and manipulation of securities, as there is a centralized system for tracking and verifying the ownership and movement of securities.
Further, as per Section 29(1A) of the Companies Act, 2013, the securities of certain prescribed classes of unlisted companies shall also be held or transferred only in dematerialized form in accordance with the provisions of the Depositories Act, 1996, and the regulations made thereunder.
The class of companies that are required to issue securities only in dematerialized form has been prescribed in Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014, and it includes unlisted public companies. Rule 9A(8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 further requires every unlisted public company to submit Form PAS-6 with the Registrar of Companies within 60 days from the conclusion of each half year, duly certified by a company secretary in practice or chartered accountant in practice, along with the prescribed fees subject to Share Capital size of the Company-
PAS-6 will be file separately for multiple types and classes of securities
If company has issued multiple types and classes of securities , in that case it is required to file multiple Form PAS-6, one for each class of security. This is because Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 is applicable for each class of security and in Form PAS-6 only one ISIN (International Securities Identification Number) can be entered.
Therefore, for each ISIN issued, a separate Form PAS-6 needs to be filed by the company. It is important for companies to ensure that they comply with this requirement and file all the necessary forms within the prescribed time limit to avoid any penalties and legal consequences.
ISIN stands for International Securities Identification Number. It is a unique identification code that is assigned to a security, such as a stock, bond, or other financial instrument, to facilitate its trading and tracking in the global market. The ISIN code consists of 12 characters and is recognized globally.
The process for generating an ISIN for a security may vary depending on the country and regulatory requirements. In India, the process for obtaining an ISIN for a security is as follows:-
The issuer of the security must first apply to a depository participant (DP) for dematerialization of the security.
Once the security is dematerialized, the issuer can apply to the National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL) for allocation of an ISIN for the security.
The issuer must submit the necessary documents and information to the depository, such as details of the security, its terms and conditions, and the company's financials, among other things.
The depository will then verify the information submitted by the issuer and allocate an ISIN for the security.
Once the ISIN is allocated, the issuer can use it for the trading and tracking of the security in the global market.
It is important to note that obtaining an ISIN for a security is a regulatory requirement for certain types of securities, such as those issued by unlisted public companies in India, as per the Companies (Prospectus and Allotment of Securities) Rules, 2014.
company cannot file Form PAS-6 if it has not obtained ISIN (International Securities Identification Number) for its securities. This is because Form PAS-6 requires the company to enter the ISIN of the securities for which the form is being filed. As per Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014, every unlisted public company is required to issue securities only in dematerialized form and obtain ISIN for each type or class of security issued by it. Therefore, the company must obtain ISIN for its securities before filing Form PAS-6. If a company has not yet obtained ISIN for its securities, it must do so before filing Form PAS-6. Once the company has obtained the ISIN, it can file the Form PAS-6 within the prescribed time limit along with the necessary details of the securities for which the ISIN has been obtained.
Form PAS-6 is a form that is required to be filed by companies for reconciliation of share capital audit report. As per Section 42(4) of the Companies Act, 2013 and Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014, every unlisted public company is required to file Form PAS-6 with the Registrar of Companies within 60 days from the conclusion of each half-year (i.e., by 30th May and 30th November).
The National Company Law Appellate Tribunal (NCLAT) did pass an order on August 24, 2020, in the matter of Swayambhu Leasing and Finance Limited & Himson Knitting Industries Private Limited, holding that the filing of Form PAS-6 is mandatory for every unlisted public company that has issued securities in dematerialized form. In this matter, Petitioner Companies mentioned that company held the shares in physical form then how filing of e-form PAS-6 without ISIN is not possible? The Petitioner Companies argued that the requirement to file Form PAS-6 was applicable only to listed companies and not to unlisted public companies but Petitioner Companies undertake to comply the same in accordance with the provisions of the Companies Act, 2013, rules framed there-under or any other law in force.
The NCLAT, in its order, observed that the requirement to file Form PAS-6 is not restricted to companies that have issued shares with differential voting rights but applies to all unlisted public companies that have issued securities in dematerialized form. The NCLAT also noted that the purpose of filing Form PAS-6 is to ensure transparency and disclosure of information related to securities issued by unlisted public companies.
In Result, the NCLAT ruled that every unlisted public company that had issued securities in dematerialized form was required to file Form PAS-6 with the Registrar of Companies within 30 days of such issue, failing which the company would be liable to penalties under the Companies Act, 2013. This order has important implications for unlisted public companies that have issued securities in dematerialized form and emphasizes the need for compliance with the requirements of Rule 9A.
Unlisted public companies are required to issue their securities only in dematerialized form, as per Section 29(1A) of the Companies Act, 2013 and Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014. The main reasons for this requirement are as follows:
Transparency and efficiency: Dematerialization of securities helps to improve the transparency and efficiency of the securities market. It eliminates the risks associated with physical certificates, such as loss, theft, forgery, and damage. It also reduces the time and cost of processing securities transactions, as there is no need for physical movement and verification of certificates.
Regulatory compliance: Dematerialization of securities is a regulatory requirement for unlisted public companies, as per the Companies Act, 2013 and the rules made thereunder. Compliance with this requirement helps companies to avoid penalties and legal action for non-compliance.
Investor protection: Dematerialization of securities provides better protection to investors, as it enables them to hold and transfer their securities in a more secure and convenient manner. It also helps to prevent fraud and manipulation of securities, as there is a centralized system for tracking and verifying the ownership and movement of securities.
If a company fails to file Form PAS-6 within the prescribed time limit, a one-time penalty of Rs.10,000 will be levied. Additionally, if the default continues, a penalty of Rs.1,000 per day will be imposed on the company and every officer who is in default, subject to a maximum of Rs.2,00,000 on the company and Rs.50,000 per officer in default, as per Section 450 of the Companies Act, 2013.