CS Executive · Capital Market and Securities Laws · Laws Governing Depositories and Depository Participants
A depository proposes new bye-laws on the manner of distributing dividends received from a company among beneficial owners, and on the procedure for conveying information on shareholder meetings to participants and beneficial owners. The Board later feels one bye-law is inadequate and directs its amendment within 30 days, but the depository does not comply. Which statement is correct under the Depositories Act, 1996?
The Board may itself make, amend or revoke the bye-laws, either in the form specified in its order or with modifications it thinks fit. Bye-laws need the Board's prior approval, and it can direct changes within a period; failure to comply triggers its own power.
- AThe bye-laws need no approval since the depository is self-regulating
- BThe Board may make or amend or revoke the bye-law itself, as originally ordered or with modifications it thinks fitCorrect
- CThe Board may only fine the depository and cannot alter bye-laws
- DThe dispute must go to the issuer, who may amend the bye-laws
Explanation
Section 26(1) requires the Board's previous approval for bye-laws, and 26(2)(i) and (j) cover information conveyance and dividend distribution. Under 26(3) the Board may direct amendment within a specified period; under 26(4), on non-compliance, it may make, amend or revoke the bye-laws itself, in the form ordered or with modifications. Option A ignores prior approval.
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