INDIA: SEBI Consultation on Distribution of Cash Benefits through Depositories

Tuesday April 19 2016

The Securities and Exchange Board of India (Sebi) has announced it is considering a proposal for the distribution of cash benefits through depositories. In India, although distribution of non-cash benefits such as bonus, rights, amalgamations, demergers, sub-division etc. are handled through depositaries, cash benefits are handled outside the depositary system. Depositaries provide details of shareholders and bondholders including name, address and bank details to the respective issuer companies which, in turn, arrange for distribution of cash benefits.

The proposal states that all cash benefits including dividend, interest and redemption proceeds may be distributed by depositaries in the case of all securities held in demat form. Issuers may be required to transfer the total amount due to clients of each depositary to that depositary, which is also the registered holder of such securities. The depositary in turn will distribute the same to its beneficial owners. In respect of securities held in physical form, the issuer company may continue to handle the distribution of cash benefits.

Responses to the consultation must be submitted by 5^th May 2016.

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