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CS Executive · Capital Market and Securities Laws · Laws Governing Depositories and Depository Participants

A depository is the registered owner in the books of Narmada Pharma Ltd for 10 lakh shares held on behalf of several investors. At the general meeting, the depository's representative wants to vote these shares as the registered owner. What is the position under the Depositories Act, 1996?

The depository cannot vote. It is deemed registered owner only for effecting transfer of ownership on behalf of beneficial owners; apart from that it has no voting rights or other rights in the securities it holds, which belong to the beneficial owners.

  1. AThe depository may vote, since it is the registered owner
  2. BThe depository may vote only if the issuer permits it
  3. CThe depository may vote only on special resolutions
  4. DThe depository has no voting rights, as apart from effecting transfers it has no rights in securities it holdsCorrect

Explanation

Section 10(1) deems the depository registered owner only for effecting transfer of ownership on behalf of a beneficial owner. Section 10(2) says that, save for this, the depository as registered owner has no voting rights or any other rights in respect of the securities. Options A to C wrongly give it some voting power.

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