Ministry of Corporate Affairs extends deadline for Dematerialisation of shares for private companies

On 12^th February 2025, the Ministry of Corporate Affairs has inserted new proviso to the Rule 9B, wherein the deadline for mandatory dematerialization of securities has been extended to 30^th June, 2025.

As a consequence, private limited companies can now issue or transfer securities in physical form until June 30, 2025, instead of the previous deadline of 30^th September, 2024.

The initial notification in this respect was notified on 27^th October 2023, by Ministry of Corporate Affairs. Ministry of Corporate Affairs has notified 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’).

As per this notification, 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 31st March, 2023) need to facilitate its shareholders to dematerialize its existing physical shares by opening DEMAT account in India

The relevant provision is as follows:

Rule 9B (2) “A private company, which as on last day of a financial year, ending on or after 31st March, 2023, is not a small company as per audited financial statements for such financial year, shall, within eighteen months of closure of such financial year, comply with the provisions of this rule.

Provided that a producer company covered under this sub-rule shall, within a period of five years of closure of such financial year, comply with the provision of this sub-rule.

 “Provided further that a private company, other than a Producer company, which is not a small company as on 31st March, 2023, may comply with the provision of this sub-rule by 30th June, 2025.”

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.

Source:

Ministry of Corporate Affairs, 27^th October 2023, the official notification can be accessed at below link:

https://www.mca.gov.in/bin/dms/getdocument?mds=ZvNqoKdfvPrRcqeoGzGdDg%253D%253D&type=open Ministry of Corporate Affairs, 12^th February 2025, the official notification can be accessed at below link: https://www.mca.gov.in/bin/dms/getdocument?mds=uB9cbvrHAgY40CP98CDaNQ%253D%253D&type=open