- SEBI issues circular for recording of non-disposal undertakings
in depository system
- Non-disposal undertakings to now be recorded in separate
modules maintained by depositories
In a bid to ensure further transparency and adequate disclosures
by promoters, the Securities and Exchange Board of India
('SEBI') has issued a circular requiring
non-disposal undertakings to be recorded in the depository
system.
BACKGROUND
The Depositories Act, 1996 introduced the concept of
dematerialized securities in India. In addition to the other
advantages of dematerialization of securities, a notable feature of
this legislation was the mechanism that was put in place for the
creation of a pledge of shares. Traditionally, a pledge of shares
involves passing of the 'constructive possession' of the
pledged shares in favour of the pledgee upon execution of the deed
of pledge. Upon the creation of a pledge of dematerialised shares,
the same is notified to the depository
