Registrar and Transfer Agent (RTA) Registration – A Liaison between Company and Securities Holders

Simardeep Singh

07 Apr, 2020

Registrar and Transfer Agent or the registrar and share transfer agents are the authorized institutions (panelled with either NSDL or CDSL, Depositories in India) so established for the purpose of complete record maintenance as well as for investors transfer of shares providing detailed information while acting as a Liaison between the Issuer and the Security holder (by way of Dematerialization of securities).

Registrar and Transfer Agents are like any other institution working under the supervision/norms of the   Regulatory Authority being SEBI, i.e., the Securities and Exchange Board of India and so regulated through the enactments in the Securities and Exchange Board of India (Registrars to an Issue and share transfer agent) Regulations, 1993.

Such maintenance of data and record-keeping is beneficial for the corporate bodies to keep the focus on their mainstream work while saving cost and time.

Nowadays, acceptance for the dematerialization of securities by the corporates has paved the way for the investors to contribute towards the growth of the entities accepting the dematerialization mechanism.

Category based Registrations:

The application for Registrations of Registrar and Transfer Agent may be made for any of the following categories:

• Category I: to act as a registrar to an issue and share transfer agent;

OR/AND

(b) Category II: to act as a registrar to an issue or as a share transfer agent;

Accordingly, the Corporate body could choose either or both the categories as per the structural services to be offered.                      

Process of Registration                

• An application by a registrar to an issue and/or share transfer agent for a grant of certificate is required to be made to SEBI Board in Form A with a non-refundable fee of INR 6 Lakh for Category I & INR 2 Lakh for Category II.
• After receipt of an application, the Board may sort for further information so required thereto to consider the application for grant of a certificate.
• Board will consider following while granting Certificate of Registration:
• have the needed infrastructure like adequate office space, equipment and manpower to discharge entrusted activities effectively;
• have any past experience in the activities (generally 3 Years Experience);
• a person directly or indirectly (may be relative or business partner as the case may be) connected with him has not been granted registration by the Board under the Act;
• fulfils the capital adequacy requirement specified: The capital adequacy requirement shall not be less than the net worth (paid up share capital/ Value of capital contributed and free reserves):

For Category I – at least INR 50 Lakh

For Category II– at least INR 25 Lakh

• subjected to any disciplinary proceedings under the said Act;
• any of its director, partner or principal officer is or has at any time been convicted for any offence involving moral turpitude or has been found guilty of any economic offence under any Act being in force;
• Are the fit and proper person (the purposes of determining whether an applicant is a fit and the appropriate person the Board may take into account as per Schedule II to the Regulations)

The Board, after being satisfied that the applicant is eligible, will send an intimation to the applicant mentioning the specific category for which the applicant has been found eligible for the grant of certificate of registration and grant a certificate in Form B.

Threshold criteria for admission as Depository Participants with NSDL or/and CDSL: 

Registrar and Transfer Agents acting as Depositary Participants have to follow the (Depositories and Participants) Regulations, 2018 and need to get themselves covered either with NDSL (National Securities Depository Limited) or/and CDSL (Central Depository Services India Limited).

For Registration with CDSL:

• Satisfying the eligibility criteria under Regulation as per SEBI (Depositories and Participants) Regulations, 1993, and as per CDSL Bye-Laws.
• The minimum net worth requirement for a stockbroker to become CDSL’s DP is INR 2 Crore.
• An application that is complete in all respects shall be considered by the Membership Committee of CDSL on its merits.

For Registration with NDSL:

• Stockbroker satisfying the minimum net worth of INR 10 Crore. In the case of a non-banking finance company (NBFC) and a registrar to an issue or share transfer agent, minimum net worth as per SEBI Regulations will suffice.

• Applicant should not, in any case, be convicted in any of the five years immediately preceding the year of application and not involved in any misappropriation of funds thereof before making an application.

• Applicant not being expelled, barred or suspended by SEBI or any other self-regulatory organisation or any stock exchange (whether Nationalised or not). However, if a period of three years or more has elapsed post the punishment, then he would be eligible.

• The applicant is required to furnish the business history of concern, including the background and experience of Directors and promoters thereon.

Inclination towards Dematerialization of Securities by Corporate(s)

Ministry of Corporate Affairs (MCA) also took steps to enhance the Standards of corporate governance system by increasing transparency and preventing malpractices, such as back-dated issuance of shares and non-payment of Share Stamping duty which varies state to state.

The Ministry noted that “exemption from payment of stamp duty on transfer and to make a move towards digitalization,” as well as ease in transferring and pledging of securities, are among the other benefits.

In times to come, the Ministry is expected to enforce similar rules for Private limited companies as well.

Other Points to Ponder for Registrar and Transfer Agent

• SEBI could any time cancel the License so granted while taking into consideration the norms so formulated to be adhered to after allowing the concerned entity.
• Capital adequacy requirements so specified above are to be maintained at all times during the period of the initial registration.
• Registrar to an issue and share transfer agent who has been granted a certificate of registration in order to keep the registration in force is required to pay a registration fee every 3rd year from 6th-year expiry from the date of grant of certificate of registration.
• Code of Conduct as per Schedule III has  to be abided all time  as per the said regulations
• Also, for Registrations, the Business Plan for the next 3 years has to be handy with physical targets, resultant income, projected profitability, etc.
• Every Registrar and Transfer Agent shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act.
• Submission of Period reports with the Board as per guidelines so defined.
• Shall take necessary steps for the redressal of grievances of the investors of the Corporate of the complaints and keep the Board informed about the so redressed and other particulars of the complaints in the manner such complaints have been redressed.
• No Registrar and Transfer Agent are to act in such an issue wherein any relative party or associate of the body corporate being issuer of securities.

Takeaway

“The angel investor/private equity investors are now hunting for the Startups which are voluntarily adopting dematerialization of their securities since the taxation framework hounded them over a period. As per Financial institutions which are operating as Depository Participants came across several requests by the Startups and Angel Investors for Dematerialization of the securities in order to ensure convenience as well as transparency”