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

Shreya holds 500 equity shares of Kaveri Textiles Ltd in demat form with a depository through her depository participant. Under the Depositories Act, 1996, who is entitled to the rights and benefits, and subject to the liabilities, in respect of these shares?

Shreya, the beneficial owner, is entitled to all rights and benefits and bears all liabilities for her demat shares. The depository is deemed registered owner only to effect transfer of ownership on her behalf, and has no voting or other rights in them.

  1. AThe depository, as registered owner of the shares
  2. BShreya, as the beneficial ownerCorrect
  3. CHer depository participant
  4. DKaveri Textiles Ltd, as the issuer

Explanation

Section 10(3) provides that the beneficial owner is entitled to all rights and benefits and is subject to all liabilities in respect of securities held by a depository. Shreya is the beneficial owner. The depository is only the registered owner for effecting transfers and has no other rights, so option A is wrong.

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