Important Update: Mandatory Dematerialisation of Securities for Non-Small Private Companies by September 30, 2024
As part of our commitment to keeping you informed about regulatory changes, we highlight a critical development from the Ministry of Corporate Affairs (MCA) in India. This update affects all non-small private limited companies, aiming to enhance transparency, protect investor interests, and strengthen corporate governance.
Overview of MCA’s New Amendment
The MCA recently notified the “Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2024.” This amendment, effective from 30th September 2024, mandates the dematerialisation of existing securities for non-small private limited companies. Moreover, all future securities must be issued or transferred exclusively in electronic (Demat) form.
Key Points of the Amendment
The MCA has introduced Rule 9B after Rule 9 of the Companies (Prospectus and Allotment of Securities) Rules, 2014. According to this rule, every non-small private limited company in India must:
- Issue all securities in dematerialised form: From 30th September 2024, new securities must be in electronic format, stored in a Demat account.
- Dematerialise all existing securities: Companies must convert all physical securities into electronic form by the same deadline.
Implications for Non-Small Private Companies
This amendment applies to all non-small private limited companies, including subsidiaries or holding companies of foreign or domestic entities. Dematerialisation modernises India’s corporate framework, reduces fraud, and simplifies transactions.
Dematerialisation converts physical share certificates into an electronic format held in a Demat account. This process enhances security, transparency, and record-keeping.
Compliance Deadline
The deadline for completing dematerialisation is 30th September 2024. Companies must comply by this date to avoid penalties.
Next Steps
We urge all companies to start preparing immediately. Begin dematerialising existing physical shares and set up processes for issuing new securities in Demat form.
Please share this crucial information with colleagues, stakeholders, and clients to ensure readiness for the upcoming changes. We are here to assist with any questions or support you may need regarding this regulatory requirement.
For more details or to discuss how this amendment affects your company, please contact our team.
At 360 Business Law, we specialise in guiding companies through complex regulatory changes like the mandatory dematerialisation of securities. Our experienced legal team provides tailored advice, ensuring that your business complies with the latest requirements under Indian law. We assist with every step of the dematerialisation process, from converting physical shares to setting up secure Demat accounts. By partnering with us, you can navigate these changes smoothly and focus on growing your business.