MCA Amendment of Dematerialisation of Shares

Ministry of Corporate Affairs have notified a pivotal amendment, Rule 9B, into the Companies (Prospectus and Allotment of Securities) Rules 2014 (‘PAS Rules’), via the Companies (Prospectus and Allotment of Securities) Second Amendment Rules 2023 (‘PAS Amendment Rules’).  Earlier the requirement of dematerialization of shares was applicable on listed companies and unlisted public companies. However, the introduction of Rule 9B mandates a new requirement of dematerialization of shares (DEMAT) by private companies.

As per this requirement, every private company (other than government companies and small companies i.e. having paid up share capital of less than or equal to Rs. 4 Crores and Turnover of less than or equal to Rs. 40 Crores as on 31^st March, 2023) need to facilitate its shareholders to open DEMAT account in India.

In order to facilitate the process, such Indian Companies need to obtain International Security Identification Number (ISIN) number before 30^th September 2024 to avoid penal consequences under Companies Act, 2013.

Further, the PAS Amendment Rules also require carrying out of below stated compliance requirements:

1. If the said private company making an offer to issue of securities via bonus issue/ right issue etc. after 30^th September 2024, is required to ensure that before making such offer entire holding of securities of its promoters, directors and KMPs should be in DEMAT form;
2. In case, any existing security holder of a private company intends to transfer its securities or subscribe in any private placement/ right issue/ bonus issue, is required to ensure that all his existing securities are held in DEMAT form.
3. Submission of half-yearly report on “Reconciliation of Share Capital” in form PAS-6 to report Registrar of Companies about the details/changes (if any) in the share capital of companies.

What are the advantages of holding shares in dematerialized form?

• Holding of Securities in DEMAT It will lead to reduction of physical paperwork.
• Payment of stamp duty at lower rates in DEMAT
• In case of shares in DEMAT form, physical transfer fraud is not possible.
• Once the shares are in DEMAT form, there is no need to issue share certificate in case of fresh issue of capital. Shares can be credited directly in DEMAT form through corporate action.
• Easy Transfer of Securities in DEMAT

How can MBG help

At MBG, we offer a comprehensive program to assist private companies to open DEMAT Account in India:

Apply for ISIN through NSDL/CDSL:

• Assist in collating documents required for obtaining ISIN Number;
• Drafting of Application for obtaining ISIN Number;
• Submission of complete application with NSDL/ CDSL to obtain the ISIN number.

Obtaining PAN of Shareholders

• Collation of necessary documents required for PAN Number;
• Preparation and submission of PAN Application to NSDL/Income Tax Department;
• Liaison with NSDL/Income Tax Department to obtain PAN.

Opening of DEMAT Account of Shareholders

• Assist in Collation of necessary documents required for obtaining DEMAT Account;
• Assist in Drafting of Application for obtaining DEMAT Account;
• Submission of complete application to obtain the DEMAT Account.

Submission of Half yearly return

• Preparation of e-Form PAS-6 with Registrar of Companies;
• Collate documents and preparation of Form PAS-6;
• File Form PAS-6 with Registrar of Companies.