The Securities and Exchange Board of India (Sebi) on February 25, 2025 released a circular permitting Associations of Persons (AoPs) to open dematerialised accounts in their own name. An Association of Persons (AoP) is a unit or group comprising multiple individuals, companies, or other entities who work together to achieve a common purpose or engage in a joint business activity.
The market regulator has allowed AoPs to open dematerialised accounts in their own name to hold assets, such as mutual fund units, corporate bonds, and government securities (G-secs). Previously, AoPs could only open dematerialised accounts in the name of natural persons who were a part of the association.
Notably AoPs have not been permitted to use the dematerialised accounts for holding equity shares. Sebi said that the new rule will be applicable from June 2, 2025.
“Upon examination of the relevant legal provisions and after detailed deliberations with stakeholders, to foster and ensure ease of doing business, it has been decided to allow opening of demat account in the name of the AoP for holding securities, such as units of mutual funds, corporate bonds and government Securities in demat account,” Sebi said in its circular.
Sebi said it had received representations from AoPs to permit opening of dematerialised accounts directly in the name of AoPs. The market regulator added that the AoPs are required to follow the rules governing its constitution.
Sebi said AoPs will be responsible for ensuring that the dematerialised account is used only for subscribing to financial instruments and securities that are permitted by statutes governing the constitution of AoPs.
AoPs will also need to submit the Permanent Account Number (PAN) of the principal officer of the AoP. The secretary, treasurer, manager or agent or any other person connected with the management or administration of the AoP will be considered the ‘Principal Officer’, according to Sebi.
Additionally, the principal officer will also be the legal representative in case any dispute arises with the AoP. However, all members of the AoP will be held jointly responsible for the dematerialised account.
Sebi has also urged depositories to take necessary steps and put in place systems to implement the change. Additionally, it asked depositories to make amendments to relevant bye-laws, rules and regulations, and bring the provisions of the circular to the notice of market participants.
