Private Limited Companies to issue shares in Demat form

In a recent regulatory update, the Ministry of Corporate Affairs (MCA) has introduced a significant change by making it mandatory for private limited companies to issue shares in dematerialised (demat) form. The primary objective of this amendment is to promote transparency and improve the corporate governance system, preventing malpractices arising due to physical securities, at the same time.

Additionally, the MCA has also introduced specific compliance requirements for public limited entities. 

Here are the key highlights of these changes:

Private Limited Companies:

  1. Dematerialised Securities for Private Companies: Every private company, except small companies, is required to facilitate dematerialisation of all their existing securities within eighteen (18) months from 31st March 2023 i.e. by 30th September 2024 and issue all new securities in dematerialised form, thereafter. Similarly, holders of securities of the private company are also required to dematerialise their securities by the aforesaid date, before transferring them or subscribing, by way of bonus shares or rights offer or private placement, to any securities of the concerned private company.
  2. Dematerialised Securities for Promoters’ and Directors’ Securities: After 30th September 2024, Private companies must ensure that the entire holding of securities of their promoters, directors, and key managerial personnel are dematerialised as per the Depositories Act and regulations, before making any offer for the issue of securities or buyback, bonus shares, or rights offer.

Public Limited Companies:

  1. Share Warrants Conversion: Public companies that issued share warrants before the commencement of the Companies Act 2013 must now inform the Registrar (RoC) about these warrants within three months using Form PAS-7. The companies must ask warrant holders to surrender their warrants within six months and convert shares into digital form. The company must also publish a notice (Form PAS-8) on their website and in newspapers to inform warrant holders about these steps and deadlines. Within six months of this amendment, the amendment also requires the bearers of the share warrants to surrender such warrants to the company and get the shares dematerialised in their account.
  2. Non-Surrendered Share Warrants: If any bearer of share warrants does not surrender them within the specified period, the company is obligated to convert these share warrants into dematerialised form and transfer them to the Investor Education and Protection Fund.

Overall, the move towards dematerialisation and enhanced compliance for public limited companies represents a proactive effort by the MCA to foster greater accountability and transparency in the corporate sector. Private and public limited companies should take prompt action to ensure they are in full compliance with these amendments to avoid any regulatory issues.

You may find the notification at the link: