The Cancellation Event
An NCLT scheme operates by universal succession. On the effective date, the transferor’s shares are extinguished, and the shareholders receive transferee shares in their place. The transferor’s physical share certificates no longer represent any capital. The transferee’s board should pass a resolution recording the cancellation of the transferor’s certificates and the extinguishment of the transferor’s share capital.
The Re-issuance Mechanics
The transferee issues new share certificates—or, in the modern practice, credits the shares in dematerialised form—to the transferor’s shareholders in accordance with the adjusted exchange ratio. The new certificates must bear the transferee’s name, the distinctive numbers, the folio number, and the date of allotment. Where the shares are issued in demat form, the transferee must instruct the depository participant to credit the shareholders’ accounts.
The Reconciliation
The transferee’s register of members must be reconciled with the transferor’s register as at the record date. The reconciliation should account for: shareholders who have changed address; shareholders whose certificates are lost or disputed; shareholders who have not provided demat account details; and fractional entitlements arising from the exchange ratio. The unreconciled balances should be disclosed to the board.
The Demat Suspense Account
Where a shareholder has not provided demat account details, the transferee may credit the shares to a demat suspense account pending the shareholder’s claim. The suspense account mechanism is prescribed by SEBI for listed companies and is good practice for unlisted companies as well. The shares in the suspense account should not be voted or traded until the rightful owner is identified.
The Documentation
The file should contain: the board resolution cancelling the old certificates; the allotment resolution; the new certificates or demat credit confirmations; the register of members reconciliation; the suspense account disclosure; and the ROC filings. A scheme that issues new shares without cancelling the old certificates creates a double-counting risk in the register.
Call to Action: For share certificate cancellation and re-issuance procedure, register reconciliation, or demat coordination, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.