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CENTRAL DEPOSITORIES ACT, 1997

Sections Contents  
1 Short title, extent and commencement.  
2 Definitions.  
3 Overriding effect.  
4 Central depository system.  
5 Central depository not to be a member of an issuer etc.  
6 Transfers under book-entry system.  
7 Effect of book-entry transfer on transferee.  
8 Central depository discharged from liability if acting on instructions.  
9 Central depository to supply information.  
10 Bonus issue by an issuer.  
11 Bar on rectification of central depository register.  
12 Pledge of book-entry securities.  
13 Consolidation or sub-division of securities by an issuer.  
14 Regulations for issue or offer for sale of securities.  
15 Conversion of non-equity securities into equity securities.  
16 Issuance of Jumbo Certificates.  
17 Inspection of the central depository register.  
18 Record of an entry prime facie evidence.  
19 Borrowing or lending of securities.  
20 Duty to maintain secrecy.  
21 Permitted disclosures.  
22 Regulation of access to the computer system.  
23 Central depository to provide assistance to the Registrar, the Authority, the State Bank of Pakistan and the stock exchanges  
24 Handling book-entry securities without authority  
25 Nomination and transmission  
26 Settlement of securities transactions using the central depository system  
27 Power of Registrar and Authority to call for information or appoint inspectors  
28 Offences  
29 Cognizance of offences by courts  
30 Offences to be non-cognizable  
31 Punishment and adjudication of fine or penalty  
32 Review and appeal  
33 Powers of the Authority in relation to proceedings  
34 Amendment of Ordinance XLVII of 1984.  
35 Central depository to have power to make own regulations.  
36 Removal of difficulties.  
  SCHEDULE  

 

CENTRAL DEPOSITORIES ACT, 1997

 (XIX OF 1997)

10th June, 1997

An Act to make provision for the establishment and operation of book-entry

systems for the transfer of securities by central depository companies;

WHEREAS it is expedient to make provision for the establishment and operation of book-entry systems for the transfer of securities by central depository companies;

It is hereby enacted as follows : –

  1. Short title, extent and commencement.- (1) This Act may be called the Central Depositories Act, 1997.

(2) It extends to the whole of Pakistan.

(3) It shall come into force at Once.

  1. Definitions.- In this Act, unless there is anything repugnant in the subject or context,-
    (1)      “Access”, in relation to the central depository system maintained by a central depository, means the placing of information on that system or the retrieval of information therefrom.

(2)      “Account” means an account maintained by a central depository in the name of an account holder so as to record the title of the account holder to any book-entry securities entered in such account.

(3)      “Account-holder” means a person who opens and maintains an account with a central depository and operates such account.

(4)      “Authority” means the Corporate Law Authority constituted under section 11 of the Companies Ordinance, 1984 (XLVII of 1984).

(5)      “Book-entry security”, in relation to a central depository, means a security which is transferable by book-entry in the central depository register pursuant to a declaration made by the central depository under sub-section (6) of section 4 and which is –

(a)      in the case of a security transferable by registration, registered in the name of the central depository or issued to the central depository pursuant to section 14 ; or

(b)      in the case of a security transferable by delivery or endorsement, deposited with or transferred by endorsement to the central depository.

(6)      “Central depository” means a central depository as defined in clause (cc) of section 2 of the Securities and Exchange Ordinance, 1969 (XVII of 1969), and registered with the Authority under section 32A of that Ordinance.

(7)      “Central depository register” means a computerized electronic register maintained by a central depository in respect of book-entry securities.

(8)      “Central depository system” means central depository system established under section 4.

(9)      “Debenture” means a debenture as defined in clause (12) of sub-section (1) of section 2 of the Companies Ordinance, 1984 (XLVII of 1984), and includes a debenture issued by an issuer other than a company.

(10)    “Document evidencing title” includes, –

(a)      In the case of any security which is not a Government security, the share certificate, debenture certificate, modaraba certificate or any other certificate representing the security ; and

(b)      In the case of any security which is a Government security, such document or other evidence of title thereto as a central depository may require.

(11)    “Eligible pledgee” means any person who, in accordance with the regulations, is recognized by a central depository as eligible for the purpose of receiving any pledge of book-entry securities.

(12)    “Handling”, with its grammatical variations and cognate expressions, in relation to a book-entry security, means the transfer of a book-entry security by electronic or similar means, the pledging of a book-entry security in accordance with section 12 or the withdrawal from the central depository system of the security represented by the book-entry security.

(13)    “Information” includes data recorded in a form which can be processed by equipment operating automatically in response to instructions given for a particular purpose.

(14)    “Issuer” means any person, the Federal Government or a Provincial Government who or which has issued or proposes to issue any security.

(15)    “Jumbo certificates” mean one or more consolidated certificates of the securities of one kind or class issued by an issuer which are registered in the name of a central depository.
(16)    “Member” means a member as defined in clause (21) of sub-section (1) of section 2 of the Companies Ordinance, 1984(XLVII of 1984), and includes the registered owner of any equity security of an issuer which is established under any other law.

(17)    “Participant” means –

(a)      An account-holder who is a member of a stock exchange; and

(b)      Any other account-holder who meets the qualifications of a participant prescribed in the regulations :

Provided that such account holders –

(i)       Perform services for sub-account holders in accordance with the terms of an agreement entered into between the central depository and each of the participants.

(ii)      Transfer any securities to the central depository to the credit of any sub-accounts under their respective accounts ; and

(iii)     Handle, on behalf of sub-account holders, the book-entry securities in the sub-accounts under their respective accounts.

(18)    “Prescribed” means prescribed by regulations made under this Act.

(19)    “Record” includes, in addition to a record in writing,-

(a)      Any photograph ;

(b)      Any disc, tape, sound-track or other device in which sounds or other data (not being visual images) are embodied so as to be capable (with or without the aid of some other instrument or machine) of being reproduced therefrom in audible or readable form ; and

(c)     Any film, tape or other device in which visual images are embodied so as to be capable (with or without the aid of some other instrument) of being reproduced therefrom in visual form ; and

(d)     Any reference to a copy of a record includes –

(i)      In the case of a record falling within paragraph (b) but not paragraph (c) of this clause, a transcript of the sounds or other data embodied therein.

(ii)     In the case of a record falling within paragraph (c) but not paragraph (b) of this clause, a still reproduction of the images embodied therein, whether enlarged or not; and

(iii)    In the case of a record falling within both paragraph (b) and paragraph (c) of this clause, the transcript of the sounds or other data embodied therein together with the still reproduction of the images embodied therein.

(20)    “Register of members” means the register of members referred to in section 147 of the Companies Ordinance, 1984 (XLVII of 1984), and includes the register of owners of any equity securities of an issuer established under any other law.

(21)    “Register of debenture-holders” means the register of debenture holders referred to in section 149 of the Companies Ordinance, 1984 (XLVII of 1984), and includes the register of holders of any non-equity securities of an issuer other than a company.

(22)    “Registrar” means the Registrar as defined in clause (31) of sub-section (1) of section 2 of the Companies Ordinance, 1984 (XLVII of 1984).

(23)    “Regulations” means the regulations made pursuant to section 35.

(24)    “Security” means-

(a)      A security as defined in sub-clause (i) of clause (1) of section 2 of the Securities and Exchange Ordinance, 1969 (XVII of 1969);

(b)      Any Government security;

(c)      Any derivative relating to a security or a Government security; or

(d)      Any other instrument specified by the Federal Government, by a notification in the official gazette, to be a security for the purposes of this Act.

(25)    “State Bank” means the State Bank of Pakistan established under the State Bank of Pakistan Act, 1956 (XXXIII of 1956).

(26)    “Stock exchange” means a stock exchange registered under the Securities and Exchange Ordinance, 1969 (XVII of 1969).

(27)    “Sub-account” means a sub-account maintained, as part of the account of a participant, in accordance with the regulations by a central depository in the name of a sub-account holder so as to record the title of the sub-account holder to any book-entry securities entered in such sub-account; and

(28)    “Sub-account holder” means a person in whose name a sub-account is opened and maintained by a participant with a central depository and is operated by that participant.

  1. Overriding effect.- The provisions of this Act shall have effect notwithstanding anything contained in the Companies Ordinance, 1984 (XLVII of 1984), or in any other law or in any charter, statute or memorandum or articles of association or in any applicable document or resolution.

    4.         Central depository system.- (1) A central depository shall establish a central depository system whereby, in accordance with the regulations,-

(a)      (i)  Accounts may be opened and maintained with the central depository by the account-holders so as to record the title of the account-holders to book-entry securities entered in such accounts ; or

(ii) Where the account holders are participants, sub-accounts may be opened and maintained, as part of the accounts of the participants, with the central depository by the participants on behalf of the sub-account holders so as to record the title of the sub-account holders to book-entry securities entered in such sub-accounts.

(b)      Transfers of such book-entry securities shall be effected electronically or by any similar means , and

(c)      Pledging of such book-entry securities may be effected in accordance with section 12.

(2)      Where any securities are issued to or registered in the name of a central depository or transferred by endorsement to or deposited with a central depository, such securities shall, in accordance with the regulations, be entered in the relevant accounts or sub-accounts, as the case may be, as book-entry securities.

(3)      Notwithstanding anything contained in sub-section (1), a participant may, with the written authorization of his clients, enter book-entry securities beneficially owned by the clients in his own account without establishing sub-accounts in the names of such clients in the central depository system :

Provided that the central depository may at its discretion, enquire whether such authorization has been obtained by the participant.

(4)      Subject to the provisions of this Act, a central depository system shall be operated by a central depository for holding book-entry securities as a nominee for account holders and for facilitating the transfer of such book-entry securities.

Provided that nothing contained herein shall be construed as preventing a central depository from holding book-entry securities, as a beneficial owner of such securities, in its own account opened and maintained on its own central depository system.

(5)      The title to any book-entry securities entered in an account shall vest in the account holder and the title to any book-entry securities entered in a sub-account shall vest in the sub-account holder.

(6)      The central depository system of a central depository shall handle such securities as book-entry securities as are declared as such by the central depository.

(7)      Different types of accounts and sub-accounts for different classes of persons may be opened with a central depository in accordance with the regulations.

 

  1. Central depository not to be a member of an issuer etc.- (1) Where a central depository is named in the register of members of an issuer,-

(a)      The central depository shall be deemed not to be a member of the issuer; and

(b)      The persons named as the account-holders or, as the case may be, the sub-account holders shall, for such period as the book-entry securities representing securities carrying voting rights in the issuer are entered against their names in the central depository register, be deemed to be members of the issuer in respect of such securities and shall, except as is otherwise provided in this Act, be entitled to all the rights, powers and privileges and be subject to all the liabilities, duties and obligations of a member as are or may be conferred by the Companies Ordinance, 1984 (XLVII of 1984), or by any other law for the time being in force or by the charter, statute or memorandum or the articles of association of the issuer.

(2)      Where a central depository is a debenture-holder of an issuer or is the owner of securities of an issuer (whether equity securities or debt securities) which do not carry voting rights in the issuer,-

(a)      The central depository shall be deemed not to be the owner of such securities ; and

(b)      The persons named as the account holders or, as the case may be, the sub-account holders shall, for such period as the book-entry securities representing such securities are entered against their names in the central depository register, be deemed to be the owners of such securities and shall, except as is otherwise provided in this Act, be entitled to all the rights, powers and privileges and be subject to all the liabilities, duties and obligations of the owners of such securities as are or may be conferred by the Companies Ordinance, 1984 (XLVII of 1984), or by any other law for the time being in force or in terms of any documents creating such securities.

(3)      Nothing in this Act shall be construed as affecting.-

(a)      The obligation of an issuer to keep a register of its members or debenture holders or allow inspections of such register under the provisions of the Companies Ordinance, 1984 (XLVII of 1984), or under any other law for the time being in force :

Provided that (a)    the issuer shall not be obliged to enter in any registers maintained by it the names and particulars of persons who are members of the issuer under clause (b) of sub–section (1) or owners of the securities of the issuer under clause (b) of sub-section (2).

(b)      (i)     The right of an account holder to request withdrawal of his securities from the central depository system at any time and, where applicable, to have them registered in his name, or where the account-holder is a participant, in any other name ; or

(ii)      the right of a participant to request a withdrawal of his sub-account holders” securities from the central depository system at any time and, where applicable, to have them registered in the name of his sub-account holder; or

 

(c)      The right of a central depository to hold book-entry securities beneficially in its own behalf.

(4)      Notwithstanding any-thing contained in this Act, an account-holder or a sub-account holder, who is named in the central depository register, at the close of business hours of the central depository on the day before the first day of the period of closure of register of members of an issuer, as the holder of book-entry securities representing securities carrying voting rights in the issuer, shall be regarded as a member of the issuer for the purpose of attending and exercising all rights at a general meeting of the members of the issuer in respect of which the register of members has been closed.

(5)      Notwithstanding any-thing contained in this Act, an account-holder or a sub-account holder, who is named in the central depository register, as at the close of business hours of the central depository on the day before the first day of the period of closure of register of non -equity securities of an issuer, as the owner of book-entry securities representing such securities of the issuer, shall be regarded as an owner of such securities for the purpose of attending and exercising all rights at a general meeting of the owners of such securities of the issuer in respect of which the register of such securities has been closed.

 

  1. Transfers under book-entry system.-(1)         Subject to the provisions of this Act, a transfer of book-entry securities from accounts or sub-accounts to other accounts or sub-accounts shall be made in such manner as may be prescribed and shall be effected by making of an appropriate entry in the central depository register in accordance with such regulations.

(2)      A transfer of book-entry securities in the manner set out in sub-section (1) shall be a valid and effective transfer of title to the securities represented by the book-entry securities.

  1. Effect of book-entry transfer on transferee.- If a transfer of book-entry securities takes place at a particular time in accordance with the provisions of section 6 –

(a)      The transferee shall be deemed to have agreed to have accepted the transfer of such book-entry securities subject to the terms and conditions on which the transferor held them immediately before the time of such transfer, and

(b)      The transferee shall be deemed to have, where applicable, agreed to become a member of the issuer and to be bound by the issuer’s charter, statute or memorandum and articles of association, as the case maybe.

 

  1. Central depository discharged from liability if acting on instructions.- (1)         A central depository, if acting in good faith and without negligence, shall not be liable to for any loss, damages, compensation, costs and expenses in tort or under any law or contract for any breach of trust or duty where the central depository has, in the accounts or sub-accounts maintained by it, made or allowed to be made entries or handled or allowed handling of any book-entry securities, according to the instructions of an account-holder or a participant, notwithstanding that the account holder or the participant, as the case may be, had no right to dispose of or take any other action in respect of such book-entry securities.

(2)       A central depository, if acting in good faith and without negligence, shall be fully discharged of its obligations to an account-holder and participant, upon the transfer or delivery of book-entry securities under the instructions of the account holder or participant, as the case may be.
(3)        A central depository shall not be required to enquire whether or not-

(a)     An account-holder or a participant, has a right to handle any book-entry securities entered in his account or in any sub-account under his account, as the case may be, or to take any action in that regard ; or

(b)      The document evidencing title in respect of a security deposited with an issuer for the purpose of registration of the transfer of the security in the name of the central depository is genuine.

 

  • Except as provided in this Act, a central depository shall not owe any fiduciary or any other obligations whatsoever, including, without limitation to the generality of the foregoing, any obligations in law, contract, tort, warranty or strict liability, to the sub-account holders in whose names sub-accounts are maintained in the central depository system.

 

  • Without prejudice to the provisions of any other law for the time being in force, if any loss is caused to an account holder or a sub-account holder due to any negligent or wrongful act or omission of a central depository or any of its employees, the central depository shall compensate such account holder or sub-account holder for such loss.

 

  1. Central depository to supply information.- (1) Every issuer which is a company or other body corporate and whose securities are entered in the central depository system of a central depository shall request the central depository, at such times as may be prescribed in the regulations, for a list of the names and other relevant details of the account-holders and sub-account holders, holding the book-entry securities of such issuer together with details of the book-entry securities of such issuer entered in the accounts of such account holders or sub-account holders, as the case may be –

(a)     For sending notices to any account-holders and sub-account holders of general meetings of the holders of any securities of the issuer;

(b)      For sending any other notices or documents to any account holders and sub-account holders which are required to be sent by the issuer to holders of any securities of the issuer;

(c)      For the purpose of allowing any account-holders and sub-account holders to attend general meetings of any holders of securities of the issuer or to appoint proxies for this purpose ;

(d)      For dispatching dividend or other warrants to any account-holders and sub-account holders ;

(e)      For dispatching to any account-holders and sub-account holders any other payments or benefits paid by the issuer; or

(f)      For dispatching to any account holders and sub-account holders formal offers for subscription of securities of the issuer.

(2)      A participant may, in respect of such book-entry securities as are beneficially owned by his clients and entered in his account, supply to the central depository the names and other details of such clients together with instructions that such names and other details be forwarded to the issuer upon a request for information made by the issuer under sub-section (1);
Provided that the persons whose names are supplied by a participant under this sub-section shall be deemed to be sub-account holders holding the book-entry securities to which they are stated by the participant to be entitled and shall be entitled to the rights of sub-account holders set out in section 5.

  • Subject to sub-section (2), the central depository shall supply to an issuer the information requested by the issuer under sub-section (1) in such manner and within such time as may be prescribed in the regulations :

 

Provided that in cases where the information requested by the issuer under sub-section (1) is for the determination of entitlement of any account-holders and sub-accountholders, in relation to the book-entry securities of the issuer held by them, to attend any meetings of the issuer or to receive payments of any dividends or other amounts payable by the issuer or to receive any offers for subscription of any shares in the issuer or for any other purpose as required by any law or the issuer’s charter, statute or memorandum or articles of association, the central depository shall supply such information to the issuer as is correct as at the close of business hours of the central depository on the day before the first day of the period of closure of register of members, debenture holders or any other securities of the issuer.

 

(4)      Subject to sub-sections (5) and (6), an issuer to whom sub-section (1) applies shall rely upon the information supplied by the central depository under sub-section (3).

(5)      An issuer who is liable to pay any dividend or other amount or issue any offer for subscription of any securities to any account-holders or sub-account holders shall pay such dividend or other amount or issue such offer for subscription of securities in accordance with such information as a central depository may give in accordance with the regulations and such payment or issue shall discharge the issuer from any liability in respect of that payment or issue to the relevant account holders or sub-account holders.

(6)      All notices and other documents which an issuer is obliged or required to send to its members or holders of any of its securities, shall in cases where an account-holder or a sub-account holder is deemed to be a member or holder of any securities of the issuer, be sent directly to the account-holder or the sub-account holder, as the case may be, on the basis of information provided by the central depository under sub-section (3) and in such manner as notices and documents are required to be sent by the Companies Ordinance, 1984 (XLVII of 1984), or any other applicable law or articles of association.

 

  1. Bonus issue by an issuer.- (1) Where an issuer whose securities are entered in the central depository system makes a bonus issue, the securities to be issued on the number of securities of that issuer registered in the name of the central depository shall be allotted to the central depository.

 

  • The central depository shall, upon allotment of securities under sub-section (1), determine the entitlements of the relevant account-holders and sub-account holders to such securities in proportion to the other securities of the same issuer standing in their accounts and sub-accounts, as of the close of business hours of the central depository on the day before the first day of the period of closure of register of members, debenture holders or any other securities of the said issuer and enter the book-entry securities in the relevant accounts and sub-accounts in accordance with the determined entitlements :

 

Provided that fractional entitlements to book-entry securities relating to the bonus securities shall not be credited by the central depository to the relevant accounts and sub-accounts but the book-entry securities representing such fractional entitlements shall be consolidated and dealt with in accordance with the regulations.

 

  1. Bar on rectification of central depository register.- Notwithstanding anything contained in section 152 of the Companies Ordinance, 1984 (XLVII of 1984), if-

(a)     An account-holder or a sub-account holder did not consent to a transfer of any book-entry securities from, or to, his account or sub-account, as the case may be, or

(b)     The name of any account-holder or sub-account holder is fraudulently or without sufficient cause entered in, or omitted from, the central depository register,
the aggrieved party may apply to the court for relief and the court may award damages to the aggrieved party but shall not order rectification of the central depository register.
Explanation: The expression “court” for the purposes of this section shall mean the High Court having jurisdiction over the defendant.

 

  1. Pledge of book-entry securities.- (1)     Book-entry securities shall be pledged only in favour of an eligible pledgee to secure the payment of a debt or liability or performance of any obligation by any account holder directly or by any sub-account holder through instructions given to a participant when the book-entry securities are blocked in the manner set out in sub-section (2).

(2)      The book-entry securities to be pledged shall be blocked when an account holder or a participant gives instructions to the central depository system in a manner that the pledger or the relevant participant when the pledger is a sub-account holder ceases to handle the pledged book-entry securities and notice of the blocking is available through the central depository system to the eligible pledgee.

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