The Depositories Act, 1996 provides for the establishment of depositories in securities with the objective of ensuring free transferability of securities with speed, accuracy and security by
(a) making securities of public limited companies freely transferable subject to certain exceptions;
(b) dematerialising the securities in the depository mode; and
(c) providing for maintenance of ownership records in a book entry form.
- In order to streamline the settlement process, the Act envisages transfer of ownership of securities electronically by book entry without making the securities move from person to person.
The Act has made the securities of all public limited companies freely transferable, restricting the company’s right to use discretion in effecting the transfer of securities, and the transfer deed and other procedural requirements under the Companies Act have been dispensed with.
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