Recording of Non Disposal Undertaking (NDU) in the Depository System
Summary
This circular mandates the creation of a framework within the depository system to record Non-Disposal Undertakings (NDUs) entered into by shareholders. It outlines specific procedural requirements for depositories, participants, and beneficial owners to capture NDU details and enforce freeze mechanisms on securities. The directive aims to enhance transparency regarding encumbered shares as required under SEBI's Takeover Regulations.
Text
The depository system provides a transparent mechanism for recording pledge transactions entered between lenders and borrowers.
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, requires promoters of a company to disclose details of their encumbered shares including NDUs by promoters which are covered under the scope of disclosures of 'Encumbrances'.
Therefore, in order to enable the shareholders to record the NDUs in the depository system, it has been decided to permit the depositories to offer a system for capturing and recording the NDUs.
Depositories shall develop a separate module/ transaction type in their system for recording NDUs.
Both parties to the NDU shall have a demat account with the same depository and be KYC compliant.
Pursuant to entering the NDU, the Beneficial Owner (BO) along with the other party shall make an application through the participant (where the BO holds his securities) to the depository, for the purpose of recording the NDU transaction.
The application shall necessarily include details of BO ID, PAN, email-id, signature(s), name of the entity in whose favor such NDU is entered and the quantity of securities.
The participant after being satisfied that the securities are available for NDU shall record the NDU and freeze for debit the requisite quantity of securities under NDU in the depository system.
The depositories shall make suitable provisions for capturing the details of BO ID and PAN of the entity in whose favor such NDU is entered by the participant.
On creation of freeze in the depository system, the depository/ participant of the BO holding shares, shall inform both parties of the NDU regarding creation of freeze under NDU.
The depositories shall make suitable provisions for capturing the details of company/ promoters if they are part of the NDU.
In case if the participant does not create the NDU, it shall intimate the same to the parties of the NDU along with the reasons thereof.
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Source: SecMarx — Recording of Non Disposal Undertaking (NDU) in the Depository System. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.