Brief Overview:

National Securities Depository Limited (“NSDL”) has amended its bye-laws and business rules to allow private companies to restrict the transfer, pledge, or hypothecation of unlisted securities.

Technical Details:

A brief overview of the amendments is provided below:

(a) Private companies may formally request NSDL to restrict or remove restrictions on the following activities in relation to unlisted securities:

(i) Transfer of unlisted securities;

(ii) Creation of pledge / margin pledge and / or hypothecation and / or holding under encumbrance on its unlisted securities,

These requests must be submitted in the prescribed format and are subject to NSDL’s verification and approval.

(b) In order to meet statutory requirements, private companies may request NSDL to freeze or lift restrictions on their unlisted shares. However, these requests must also follow the specified procedure and will be acted upon after due verification.

JC Takeaway:

This regulatory shift enhances issuer control and statutory compliance in the handling of dematerialised shares prior to public listing. This may also impact financing transactions as the restrictions may be in the nature of encumbrances as well.

For further details, please see:  

Amendments to Bye Laws and Business Rules of NSDL

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