SHARES AND SECURITIES -PAN AND NOMINATION SHOULD NOT BE COMPULSORY- RELAXATION IS DESIRED at least for small investors and joint holders.

[DEV KUMAR KOTHARI]

Circulars on the  relevant subject -

SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/37   March 16, 2023 –

this circular  updates requirements substitutes and consolidate   earlier circulars namely:

SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/687 December 14, 2021

SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/655  November 03, 2021

Therefore, now one can refer to latest circular and earlier circulars can be ignored so far requirement of KYC is concerned.

Vide paragraph no. 4 we find mandatory requirements:

4. Mandatory furnishing of PAN, KYC details and Nomination by holders of physical securities.

It shall be mandatory for all holders of physical securities in listed companies to furnish PAN, Nomination, Contact details, Bank A/c details and Specimen signature for their corresponding folio numbers. The detailed requirements are as per Annexure – A.

PAN should not be compulsory:

In shares, investment can be made for small sums. Now-a-days we find face value of shares of  many companies as low as Rupee one only. Trading lot is one share that means any one can buy one share at a time and therefore, investment can be minimal.

Large number of individuals have no taxable income and there is no mandatory requirement for them to have a PAN.

There are many shareholders who are holding shares of many companies which issued shares long ago and at that time having multiple folios was considered beneficial for getting corporate benefits of preferential issue l shares of group companies,  additional  right shares etc. Therefore, people used to make applications in various combination of joint names and different addresses ( of different joint holder, office address, residential address, new  as well as old name and number of building when there was change in names of streets, roads and renumbering of building numbers etc. For example. The same building of author was earlier knows as 68B, Russa Road East  (Kolkata 700 033.), and was renamed and renumbered as 20A Charu Chandra Place East , (Kolkata 700 033). Author and his associates are holding many shares with and  one or both of name and number of building. Even now a- days both addresses are working therefore,  no need was felt to change address.

PAN card holders vis a vis tax payers:

In search on https://www.google.com/search?q=how+many+PAN+cards+exist&rlz=1C1CHBD_enIN969IN970&oq=how+many+PAN+cards+exist+

&aqs=chrome..69i57j0i22i30j0i390i650l4.21097j0j7&sourceid=chrome&ie=UTF-8

How many PAN card holders are there in India?

Although there are only 58 million income tax payers in India, yet there are 445 million genuine PANs issued as of 31 March 2019.

Therefore, it is clear that a large number of individual  investors in shares are not required to file ITR. However for convenience many have obtained PAN. We know and can find  many domestic helps, drivers, and low wage earners are having PAN in our neighborhood. They obtained PAN because it was easy to obtain and hold PAN ( till any notice is received from department for non-filing of ITR or for some information available with department.

Considering difficulties for small investors PAN should not be mandatory.

Nomination:

To nominate to any person or persons or not to nominate at all  is personal decision of investor. There should not be compulsion for nomination.

 However , in view of requirement of SEBI obtaining PAN  is now compulsory ,  because without PAN , KYC requirement will not be met and shares held without complying with KYC requirement will be frozen by company and its RTA for any processing about shares held in frozen folios due to non KYC status.

Similarly , nomination seems  compulsory. In earlier circulars there was an option to ‘opt out’ but in new circular there seems mandatory requirement  to nominate . Although in Annexure there is mention of opt-out,  but this seems effective only  during timelines of old circular.

There should not be mandatory requirement for nomination or opt out for nomination, If a shareholder has not nominated, then it must be deemed that he has opted not to nominate and  has left at discretion of legal heirs how to deal with any property like share  in which he has not made a joint holder and has not nominated any one.

Request to SEBI:

For small investors, holding investment in any company not exceeding specified amount say Rs. five lakh should be exempted from requirement of furnishing of PAN and nomination for meeting KYC compliance.

Instead of PAN , Election commissions ID card and /  or AADHAR  card can be prescribed.

Nomination:

In case of nomination there should not be requirement of witnesses.

A nomination is made under the signature of shareholder  which is as per his signature  in records of company / RTA and has also been verified by bank in which shareholder has account.

There is no purpose of having witnesses of two persons for nomination with further  requirement  copy of PAN and address proof of witnesses.

These requirement must be waived in case of all shareholders.

Therefore, only mandatory  requirement for Address Proof and PAN and nomination must be waived.

Bank details and signature verification:

Only companies  which are in process of paying out any corporate benefit like dividend, redemption money, encashment of  fractional entitlement etc. need bank details for practical purposes. Large number of companies falls in category of non dividend paying companies and there are no other occasion for paying out other cash benefit.

Bank account and specimen signature can change from time to time.

Therefore, requirement of having bank account details, cancelled cheque, signature  verification  by bank etc. are not at all required  and in future also there may not be such need in majority of companies.

Therefore, in such cases requirement of Bank account details and verification can be waived.

When any cash corporate benefit will be paid through banking channel. The shareholder can furnish his bank account details without signature verification, blank cancelled cheque. This is because if he gives wrong bank account details he will not get money in his bank account. Therefore, it is in interest of shareholder to give correct details of his bank account including name, account number and banking details and numbers.

SEBI must also try to reduce paperwork at least for small shareholders.