SEBI Proposes Mandatory Dematerialization of Securities for Corporate Actions, Aiming to Eliminate Risks

Consultation Paper dated 14.01.2025

SEBI has introduced a consultation paper proposing amendments to the SEBI (LODR) Regulations, 2015, aimed at promoting dematerialization of securities and streamlining processes in response to the current regulatory landscape.

Presently, SEBI (LODR) Regulations, 2015 does not specifically provide for issuance of new securities mandatorily in dematerialised form in case of stock split, consolidation of face value of shares or merger/demerger. However, presently, if desired by the listed companies, it can be included in the shareholders’ resolution approving such corporate action. Similarly, issuance of shares in demat form pursuant to merger/demerger can also be covered in the scheme of arrangement.

Accordingly, SEBI has now proposed to amend SEBI (LODR) Regulations, 2015 to mandate issuance of securities only in demat form in case of sub-division/split/consolidation of face value of securities and scheme of arrangement to encourage demat holding of securities.

Further, in case an investor does not have a demat account then the Issuer companies shall be required to open a separate demat account with a suitable ledger of ownership (“suspense escrow account”) for dealing with such securities.

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