MCA demat of Shares update

MCA demat of Shares update

Nov 03, 2023

MCA notifies mandatory dematerialisation for securities of private companies

1. Sub-section (1A) was inserted under Section 29 of the Companies Act 2013 facilitating the Central Government to prescribe such class or classes of unlisted companies for which the securities shall be held and/ or transferred in dematerialised form only. 

2. In exercise of the powers conferred under the said section, Rule 9B has been inserted vide the Companies (Prospectus and Allotment of securities) Second Amendment Rules, 2023 specifying the requirement of mandatory dematerialisation of securities issued by private companies.

3. The mandatory dematerialisation requirement is applicable on all securities of every private company, excluding small companies and government companies. The provisions are applicable with immediate effect, and a timeline upto 30th September, 2024 (18 months from 31st Mar 2023) is provided for the compliance with the mandatory dematerialisation requirements.

4. In case a company ceases to be a small company after 31st March, 2023, the timeline of 18 months triggers from the close of the financial year in which it ceases to be a small company.

5. Private companies shall Issue all securities in dematerialised form only and facilitate dematerialisation of all existing securities. 

6. Private companies should make an application with depository for dematerialisation of all existing securities and securing ISIN for each type of security. 

7. A small company means a company, other than a public company, having 
(A)paid up share capital not exceeding Rs. 4 crores and 
(B)turnover not exceeding Rs. 40 crores. 
Further, the following cannot be a small company – 
(A) A holding company or a subsidiary company. 
(B) A company registered under section 8.
(C) A company or body corporate governed by any special Act.