Fit and Proper Person

No person shall, directly or indirectly, acquire or hold equity shares or voting rights of a depository unless he is a fit and proper person.

Such a requirement to ensure that all its shareholders are fit and proper persons shall not be applicable to a depository for shareholding of a person who directly or indirectly, acquires or holds less than two percent equity shares or voting rights of such listed depository.

Any person holding two percent or more of the paid up equity share capital in a depository shall file a declaration within fifteen days from the end of every financial year to the depository that he complies with the fit and proper criteria.

“Criteria for determining a fit and proper person”
For the purpose of determining whether an applicant, depository, its shareholder, director, key management personnel or a participant, is a ‘fit and proper person’ under these regulations, the criteria specified under regulation 20 of Securities Contracts (Regulation) (Stock exchanges and Clearing Corporations) Regulations, 2018, shall be applicable:

• such person has a general reputation and record of fairness and integrity, including but not limited to—
1. Financial integrity;
2. good reputation and character; and
3. honesty;


• such person has not incurred any of the following disqualifications—
1. The person or any of its whole time directors or managing partners, has been convicted by a court for any offence involving moral turpitude or any economic offence or any offence against the securities laws;
2. An order for winding up has been passed against the person;
3. The person, or any of its whole time directors or managing partners, has been declared insolvent and has not been discharged;
4. An order, restraining, prohibiting or debarring the person or any of its whole time directors or managing partners, from dealing in securities or from accessing the securities market, has been passed by the Board or any other regulatory authority and a period of three years from the date of the expiry of the period specified in the order has not elapsed;
5. Any other order against the person, or any of its whole time directors or managing partners, which has a bearing on the securities market, has been passed by the Board or any other regulatory authority, and a period of three years from the date of the order has not elapsed;
6. The Board has initiated recovery proceedings under the SEBI Act, 1992 and are pending;
7. The person has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force;
8. The person is financially not sound or has been categorized as a willful defaulter; and
9. Any other disqualification as specified by the Board.

Eligibility for acquiring or holding shares in a Depository:

Regulation 22(3) of SEBI (Depositories and Participants) Regulations, 2018 inter alia states that:

Any person eligible to acquire or hold more than five percent of the paid up equity share capital under sub-regulation (1) and sub-regulation (2) of regulation 21 may acquire or hold more than five percent of the paid up equity share capital of a depository only if the person has obtained prior approval of the Board (SEBI)
In view of the above regulation, it is hereby informed that the shareholders who along with other shareholders fall under the category of ‘Persons Acting In Concert’ as defined under regulation 2(q) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, should inform CDSL about the same along with PANs of all such shareholders who are acting in concert with them in order to enable CDSL to monitor their shareholdings as stipulated under regulation 22A of the SEBI (Depositories & Participants) Regulations, 2018.

Further, the shareholders are requested to refer the following statutory requirements w.r.t. acquiring shares in CDSL