CDSC expects revised fee to lure companies

KATHMANDU, JAN 17: 

CDS and Clearing Ltd (CDSC), that is yet to become fully functional, is expecting the revised fee structure to lure companies and investors to get their shares dematerialised soon. 

Nepal’s only central depository was supposed to start the electronic clearance of traded shares by mid-January but it did not materialise. Moreover, among the 220 listed companies at the stock exchange, only five have registered at CDSC for dematerialising shares. The deadline for companies to dematerialise shares was mid-January. 

“The regulator has already approved the amendment in the bylaws, but progress of CDS and Clearing is very unsatisfactory, and as a regulator we cannot allow it to procrastinate much further,” said director at Securities Board of Nepal (Sebon) Niraj Giri.

CDSC Bylaws 2068 has already been revised to accommodate the new fee structure. CDS and Clearing has revised the registration fee for the companies to attract them. The current provision has reduced the fees from Rs 150,000 to Rs 50,000 based on the paid up capital of the companies. 

Likewise, the new bylaws have also enhanced the capacity of depository participants (DP) to hold the shares in their custody. 

Depository participants can now hold shares worth 500 times their net worth on behalf of the beneficial owners. Earlier, depository participants were allowed to hold up to 200 times their net worth. 

Likewise, depository participants can charge Rs 25 per transaction, which earlier was fixed at Rs 20 or 0.25 per cent of the total amount, whichever was higher. 

CDS and Clearing Ltd was expected to become functional a year ago which would have changed the face of the secondary market. CDSC also has to tweak its software to accommodate tax provisions. 

The capital market regulator has expressed hope that the operation of the central depository company will have a positive impact on the stock market. 

Since the operation of CDS and Clearing Ltd will displace manual share transfer with an automated system, it was supposed to allow hassle free participation of investors even from outside the valley due to easier settlement. 

“CDSC should not expect Sebon to order the listed companies to get registered. As a profit oriented business entity it needs to be proactive itself,” pointed out Giri. 

There are 235 demat accounts and CDSC has given licence to five depository participants so far that will hold the shareholders’ dematerialised shares. 

The deadline for public companies to get registered is up by mid-January but the inability of CDS and Clearing Ltd to start operations has voided the rule. 

Moreover, if investors dematerialise the shares of the companies that have registered their shares at CDS and Clearing Ltd for dematerialisation they will not be able to trade those shares. 

Regulation says that investors have six months to get their shares dematerialised after the companies register at CDS and Clearing Ltd for being eligible to trade shares. CDSC established under the Company Act is promoted by Nepal Stock Exchange in 2010 to provide centralised depository, clearing and settlement services.

Source: THT