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

Ananya holds shares of Kaveri Pharma Ltd in her demat account. The company declares a loss-making year and makes a call on partly paid shares she holds. Who bears the liability on those securities under the Depositories Act, 1996?

Ananya bears the liability. Under the Depositories Act, 1996, the beneficial owner is entitled to all rights and benefits and is subject to all liabilities in respect of securities held by a depository, while the depository's role as registered owner is limited to effecting transfers.

  1. AThe depository, as the registered owner
  2. BThe depository participant through whom she holds the account
  3. CThe issuer company alone
  4. DAnanya, as the beneficial owner, who is entitled to all rights and benefits and subject to all liabilitiesCorrect

Explanation

The Act provides that the beneficial owner is entitled to all the rights and benefits and is subject to all the liabilities in respect of securities held by a depository. The depository's registered ownership is only for effecting transfers, so the liability does not shift to it.

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