PAS-6: Half Yearly Return (How to dematerialize the securities)

PAS-6: Half Yearly Return (How to dematerialize the securities). Who is Public Company and how it’s different from a Private Company ?
Public company is a company that is registered under the Companies Act, 2013 or any previous companies law and has at least 3 Directors and 7 shareholders, and there is no limit on the maximum number of shareholders. The company can issue its shares to the general public and can raise funds through public offerings.
Private company, on the other hand, is a company that is also registered under the Companies Act, 2013 or any previous companies law has at least 2 Directors and 2 shareholders, but it restricts the right to transfer its shares and limits the maximum number of shareholders to 200. The shares of a private company are not freely transferable, and the company cannot raise funds through public offerings.
Key differences between public and private companies-
» Number of Shareholders: A public company must have at least 7 shareholders, whereas a private company must have at least 2 shareholders and cannot have more than 200 shareholders.
» Transferability of Shares: The shares of a public company are freely transferable, whereas the shares of a private company are not freely transferable.
» Disclosure Requirements: Public companies have to comply with more stringent disclosure requirements, including the filing of financial statements, annual reports, and other regulatory disclosures. Private companies have less stringent disclosure requirements.
» Raising Funds: Public companies can raise funds from the general public through public offerings of shares, whereas private companies cannot raise funds through public offerings.
» Management and Control: Public companies are subject to more regulations and are typically managed by a board of directors, whereas private companies have greater flexibility in their management and control structures.
» Governance requirements: A public company is subject to more governance requirements, including the appointment of independent directors, the establishment of committees, and the adoption of a code of conduct, whereas a private company has fewer governance requirements.
Therefore, while both public and private companies are legal entities registered under the Companies Act, they differ in their ownership structure, transferability of shares, disclosure requirements, fundraising abilities, and management and control structures.
Who is called Unlisted Public Company ?
An unlisted public company is a company that has issued securities to the public but does not have its shares listed on a stock exchange. It is registered under the Companies Act, 2013 and complies with the regulations and guidelines issued by the Securities and Exchange Board of India (SEBI). In simple manner we can say that its issued securities to the public (through prospectus or otherwise) but has not applied for the admission of its securities to any stock exchange. Unlisted public companies have greater flexibility in terms of governance, capital structure, and shareholding as compared to listed public companies. Also, the shares of unlisted public companies are less liquid and cannot be easily traded as they are not listed on any stock exchange.
Unlike a listed public company, the shares of an unlisted public company are not traded on a stock exchange or over-the-counter market. Instead, the shares are held by a small group of investors, which may include institutional investors, private equity firms, or high net worth individuals where-
» An unlisted public company can raise capital by issuing securities to the public, but cannot list its shares on a stock exchange.
» Shares of an unlisted public company are freely transferable, subject to any restrictions imposed by the company's articles of association (AOA)
Introduction of PAS-6
                     
 The Government of India, Ministry of Corporate Affairs (MCA), notified an amendment to The Companies (Prospectus and Allotment of Securities) Rules, 2014 on 10th September 2018, making it mandatory for every unlisted public company to facilitate dematerialization of all its existing securities. MCA notified this on 23rd May 2019 that every unlisted public company is required to file Form PAS-6 (Reconciliation of Share Capital Audit Report) on a half-yearly basis.
Through this amendment MCA also mandates that 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 shall ensure that the entire holding of securities of its promoters, directors, and key managerial persons has been dematerialized before making such an offer.
» Further, the amendment states that the transfer of securities on or after 2nd October 2018 shall be effected only if such securities are dematerialized before the transfer.
Process of dematerialization of securities by unlisted Public Companies-
The process of dematerialization of securities involves converting physical share certificates into electronic form, making them tradable in a dematerialized or digital format. Here is a step-by-step process for dematerialization of securities:-
» Open a demat account: The first step towards dematerialization is to open a demat account with a Depository Participant (DP) registered with a Depository, either NSDL or CDSL.
» Submit demat request: The shareholder needs to fill out a dematerialization request form (DRF) available with the DP and submit the same along with the share certificates to the DP. The shareholder also needs to provide a self-attested copy of the PAN card.
» Verification: The DP verifies the details and forwards the DRF and share certificates to the Registrar and Transfer Agent (RTA) of the company.
» Confirmation: The RTA confirms the details of the share certificates and gives an electronic confirmation of the dematerialization request to the Depository.
» Credit to demat account: Once the confirmation is received, the Depository credits the shares to the demat account of the shareholder.
» Intimation: The Depository sends an intimation of the credit to the shareholder and updates the records of the company.
The ISIN will be generated after the securities gets dematerialized and Once the dematerialization process is complete, the Depository Participant (DP) will generate an ISIN for the securities and update the same in the demat account of the shareholder. Dematerialization of securities makes it easier for investors to buy, sell, and transfer securities, reduces the risk of loss, and increases transparency in transactions.
Documents Required for dematerialization -
For obtaining ISIN for the Company, will be done through NSDL/CDSL and documents requirements may vary depending on the specific requirements of the depository participant or registrar and transfer agent like-
1. Certificate of Incorporation (COI) / Memorandum of Association (MOA) / Articles of Association (AOA) of the company
2. Latest financial statements of the company, including balance sheet, profit and loss statement, and notes to accounts
3. PAN card copy of the company
4. TAN number and GST registration certificate of the company
5. PAN and Aadhaar card copies of all directors and authorized signatory
6. Board resolution authorizing the authorized signatory to apply for ISIN/DEMAT registration on behalf of the company
7. Bank statement of the company
8. Contact details of the authorized signatory, including name, email address, and phone number.
What is PAS-6, Due date of filing and Why its introduced ?
PAS-6 stands for the "Reconciliation of Share Capital Audit" report, which is a mandatory compliance requirement for all unlisted companies under the Companies Act, 2013, and the rules made thereunder. Form PAS-6 is an audit report that reconciles the total shares held by the company in its records with the total number of shares held in dematerialized form and physical form. The form also requires information on changes in the share capital of the company during the half-yearly period, such as issue of shares, buyback of shares, forfeiture of shares, and conversion of securities.
The purpose of this report is to ensure that there is no discrepancy or mismatch between the company's records and the actual number of shares held by the shareholders. Every unlisted company is required to file the PAS-6 report with the Registrar of Companies (ROC) on an annual basis. The report must be prepared by a qualified practicing company secretary or chartered accountant and must be filed within 60 days from the end of the financial year along with the annual return of the company.
Importantly, ISIN (International Securities Identification Number) is not mandatory for filing PAS-6 (Form for reconciliation of share capital audit report on a half-yearly basis). ISIN is a unique identification number that is used to identify securities such as shares, bonds, and debentures. It is assigned by the depositories such as NSDL and CDSL. companies that have issued securities in dematerialized form are required to ensure that the ISIN of the securities is updated and reconciled with the depository's records. The purpose of this reconciliation is to ensure that the company's records and the depository's records match, and there are no discrepancies or errors in the share capital of the company.
The PAS-6 report should contain details of the company's share capital, the number of shares issued and subscribed, the amount paid-up, and the changes in share capital during the financial year. The report must also include a certificate from the auditor confirming the accuracy of the report.
Compliance Calendar of PAS-6-
The due date for filing PAS-6 (Form for reconciliation of share capital audit report on a half-yearly basis) by unlisted public companies. As per Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 mandates that every unlisted public company must file the PAS-6 report with the Registrar of Companies within 60 days from the end of each financial year. 
The due date for filing Form PAS-6 is 60 days from the end of the half-yearly period to which it pertains-
The half-yearly periods are 1st April to 30th September 29th November of the same year.
1st October to 31st March. 30th May of the same year.
PAS-6 is a form introduced by the Ministry of Corporate Affairs (MCA) through the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2018, which was notified on September 10, 2018. The amendment introduced the requirement for all unlisted public companies to file a PAS-6 form with the Registrar of Companies (RoC) for reconciliation of share capital audit. PAS-6 provides information about the changes in the share capital of an unlisted public company during the financial year, reconciling the total shares issued with the total shares held in dematerialized form with the depositories. 
The PAS-6 form must be pre-certified by a practicing Company Secretary or a practicing Chartered Accountant and filed with the RoC within 60 days from the end of each financial year. The introduction of PAS-6 aims to ensure transparency and accountability in the share capital of unlisted public companies, and to bring them in line with the regulations applicable to listed companies.
Provisions Applicable-
The Ministry of Corporate Affairs (MCA) has also issued the Companies (Share Capital and Debentures) Rules, 2014, which provide detailed guidelines for the preparation of the PAS-6 report. Under Companies Act 2013, Section 55(3) of the Companies Act, 2013 requires every unlisted public company to issue securities only in dematerialized form. 
The PAS-6 Filing must reconcile the total issued and listed capital with the depository's records. It is important for unlisted public companies to ensure timely compliance with the PAS-6 filing requirement to avoid penalties and legal consequences under the Companies Act, 2013.
Case Law where imposed a penalty for non-filing of PAS-6
Recently, one case found where Company got penalised for non-filing of PAS-6. 
Non-Compliance can result in penalties and legal consequences including penalties under Section 450 of the Companies Act, 2013. Hence, it is crucial for unlisted companies to ensure timely compliance with the PAS-6 filing requirements.
Conclusion-
The PAS-6 report should contain details of the company's share capital, the number of shares issued and subscribed, the amount paid-up, and the changes in share capital during the financial year. The report must also include a certificate from RTA.
If you are looking for dematerialization of securities and filing of PAS-6, we at Compliance Calendar LLP have the dedicated group of professionals who are experts in their field and can give you a complete handholding throughout the dematerialization of securities Procedure, dealing with RTA and filing with ROC. If you have any query, please feel free to reach us at info@ccoffice.in or call us at 9988424211.

Who is Public Company and how it’s different from a Private Company ?

Public company is a company that is registered under the Companies Act, 2013 or any previous companies law and has at least 3 Directors and 7 shareholders, and there is no limit on the maximum number of shareholders. The company can issue its shares to the general public and can raise funds through public offerings.

Private company, on the other hand, is a company that is also registered under the Companies Act, 2013 or any previous companies law has at least 2 Directors and 2 shareholders, but it restricts the right to transfer its shares and limits the maximum number of shareholders to 200. The shares of a private company are not freely transferable, and the company cannot raise funds through public offerings.

Key differences between public and private companies-

» Number of Shareholders: A public company must have at least 7 shareholders, whereas a private company must have at least 2 shareholders and cannot have more than 200 shareholders.

» Transferability of Shares: The shares of a public company are freely transferable, whereas the shares of a private company are not freely transferable.

» Disclosure Requirements: Public companies have to comply with more stringent disclosure requirements, including the filing of financial statements, annual reports, and other regulatory disclosures. Private companies have less stringent disclosure requirements.

» Raising Funds: Public companies can raise funds from the general public through public offerings of shares, whereas private companies cannot raise funds through public offerings.

» Management and Control: Public companies are subject to more regulations and are typically managed by a board of directors, whereas private companies have greater flexibility in their management and control structures.

» Governance requirements: A public company is subject to more governance requirements, including the appointment of independent directors, the establishment of committees, and the adoption of a code of conduct, whereas a private company has fewer governance requirements.

Therefore, while both public and private companies are legal entities registered under the Companies Act, they differ in their ownership structure, transferability of shares, disclosure requirements, fundraising abilities, and management and control structures.

Who is called Unlisted Public Company ?

An unlisted public company is a company that has issued securities to the public but does not have its shares listed on a stock exchange. It is registered under the Companies Act, 2013 and complies with the regulations and guidelines issued by the Securities and Exchange Board of India (SEBI). In simple manner we can say that its issued securities to the public (through prospectus or otherwise) but has not applied for the admission of its securities to any stock exchange. Unlisted public companies have greater flexibility in terms of governance, capital structure, and shareholding as compared to listed public companies. Also, the shares of unlisted public companies are less liquid and cannot be easily traded as they are not listed on any stock exchange.

Unlike a listed public company, the shares of an unlisted public company are not traded on a stock exchange or over-the-counter market. Instead, the shares are held by a small group of investors, which may include institutional investors, private equity firms, or high net worth individuals where-

» An unlisted public company can raise capital by issuing securities to the public, but cannot list its shares on a stock exchange.

» Shares of an unlisted public company are freely transferable, subject to any restrictions imposed by the company's articles of association (AOA)

Introduction of PAS-6

The Government of India, Ministry of Corporate Affairs (MCA), notified an amendment to The Companies (Prospectus and Allotment of Securities) Rules, 2014 on 10th September 2018, making it mandatory for every unlisted public company to facilitate dematerialization of all its existing securities. MCA notified this on 23rd May 2019 that every unlisted public company is required to file Form PAS-6 (Reconciliation of Share Capital Audit Report) on a half-yearly basis.

Through this amendment MCA also mandates that 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 shall ensure that the entire holding of securities of its promoters, directors, and key managerial persons has been dematerialized before making such an offer.

» Further, the amendment states that the transfer of securities on or after 2nd October 2018 shall be effected only if such securities are dematerialized before the transfer.

Process of dematerialization of securities by unlisted Public Companies-

The process of dematerialization of securities involves converting physical share certificates into electronic form, making them tradable in a dematerialized or digital format. Here is a step-by-step process for dematerialization of securities:-

» Open a demat account: The first step towards dematerialization is to open a demat account with a Depository Participant (DP) registered with a Depository, either NSDL or CDSL.

» Submit demat request: The shareholder needs to fill out a dematerialization request form (DRF) available with the DP and submit the same along with the share certificates to the DP. The shareholder also needs to provide a self-attested copy of the PAN card.

» Verification: The DP verifies the details and forwards the DRF and share certificates to the Registrar and Transfer Agent (RTA) of the company.

» Confirmation: The RTA confirms the details of the share certificates and gives an electronic confirmation of the dematerialization request to the Depository.

» Credit to demat account: Once the confirmation is received, the Depository credits the shares to the demat account of the shareholder.

» Intimation: The Depository sends an intimation of the credit to the shareholder and updates the records of the company.

The ISIN will be generated after the securities gets dematerialized and Once the dematerialization process is complete, the Depository Participant (DP) will generate an ISIN for the securities and update the same in the demat account of the shareholder. Dematerialization of securities makes it easier for investors to buy, sell, and transfer securities, reduces the risk of loss, and increases transparency in transactions.

Documents Required for dematerialization -

For obtaining ISIN for the Company, will be done through NSDL/CDSL and documents requirements may vary depending on the specific requirements of the depository participant or registrar and transfer agent like-

1. Certificate of Incorporation (COI) / Memorandum of Association (MOA) / Articles of Association (AOA) of the company

2. Latest financial statements of the company, including balance sheet, profit and loss statement, and notes to accounts

3. PAN card copy of the company

4. TAN number and GST registration certificate of the company

5. PAN and Aadhaar card copies of all directors and authorized signatory

6. Board resolution authorizing the authorized signatory to apply for ISIN/DEMAT registration on behalf of the company

7. Bank statement of the company

8. Contact details of the authorized signatory, including name, email address, and phone number.

What is PAS-6, Due date of filing and Why its introduced ?

PAS-6 stands for the "Reconciliation of Share Capital Audit" report, which is a mandatory compliance requirement for all unlisted companies under the Companies Act, 2013, and the rules made thereunder. Form PAS-6 is an audit report that reconciles the total shares held by the company in its records with the total number of shares held in dematerialized form and physical form. The form also requires information on changes in the share capital of the company during the half-yearly period, such as issue of shares, buyback of shares, forfeiture of shares, and conversion of securities.

The purpose of this report is to ensure that there is no discrepancy or mismatch between the company's records and the actual number of shares held by the shareholders. Every unlisted company is required to file the PAS-6 report with the Registrar of Companies (ROC) on an annual basis. The report must be prepared by a qualified practicing company secretary or chartered accountant and must be filed within 60 days from the end of the financial year along with the annual return of the company.

Importantly, ISIN (International Securities Identification Number) is not mandatory for filing PAS-6 (Form for reconciliation of share capital audit report on a half-yearly basis). ISIN is a unique identification number that is used to identify securities such as shares, bonds, and debentures. It is assigned by the depositories such as NSDL and CDSL. companies that have issued securities in dematerialized form are required to ensure that the ISIN of the securities is updated and reconciled with the depository's records. The purpose of this reconciliation is to ensure that the company's records and the depository's records match, and there are no discrepancies or errors in the share capital of the company.

The PAS-6 report should contain details of the company's share capital, the number of shares issued and subscribed, the amount paid-up, and the changes in share capital during the financial year. The report must also include a certificate from the auditor confirming the accuracy of the report.

Compliance Calendar of PAS-6-

The due date for filing PAS-6 (Form for reconciliation of share capital audit report on a half-yearly basis) by unlisted public companies. As per Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 mandates that every unlisted public company must file the PAS-6 report with the Registrar of Companies within 60 days from the end of each financial year.

The due date for filing Form PAS-6 is 60 days from the end of the half-yearly period to which it pertains-

The half-yearly periods are 1st April to 30th September 29th November of the same year.

1st October to 31st March. 30th May of the same year.

PAS-6 is a form introduced by the Ministry of Corporate Affairs (MCA) through the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2018, which was notified on September 10, 2018. The amendment introduced the requirement for all unlisted public companies to file a PAS-6 form with the Registrar of Companies (RoC) for reconciliation of share capital audit. PAS-6 provides information about the changes in the share capital of an unlisted public company during the financial year, reconciling the total shares issued with the total shares held in dematerialized form with the depositories.

The PAS-6 form must be pre-certified by a practicing Company Secretary or a practicing Chartered Accountant and filed with the RoC within 60 days from the end of each financial year. The introduction of PAS-6 aims to ensure transparency and accountability in the share capital of unlisted public companies, and to bring them in line with the regulations applicable to listed companies.

Provisions Applicable-

The Ministry of Corporate Affairs (MCA) has also issued the Companies (Share Capital and Debentures) Rules, 2014, which provide detailed guidelines for the preparation of the PAS-6 report. Under Companies Act 2013, Section 55(3) of the Companies Act, 2013 requires every unlisted public company to issue securities only in dematerialized form.

The PAS-6 Filing must reconcile the total issued and listed capital with the depository's records. It is important for unlisted public companies to ensure timely compliance with the PAS-6 filing requirement to avoid penalties and legal consequences under the Companies Act, 2013.

Case Law where imposed a penalty for non-filing of PAS-6

Recently, one case found where Company got penalised for non-filing of PAS-6.

Non-Compliance can result in penalties and legal consequences including penalties under Section 450 of the Companies Act, 2013. Hence, it is crucial for unlisted companies to ensure timely compliance with the PAS-6 filing requirements.

Conclusion-

If you are looking for dematerialization of securities and filing of PAS-6, we at Compliance Calendar LLP have the dedicated group of professionals who are experts in their field and can give you a complete handholding throughout the dematerialization of securities Procedure, dealing with RTA and filing with ROC. If you have any query, please feel free to reach us at info@ccoffice.in or call us at 9988424211.