Dematerialisation of the Securities of Private Company

INTRODUCTION

Dematerialisation (Demat) of securities has gained its importance for a very long time. The Government has, from time to time, widened the scope and applicability of the same from listed companies to closely held public companies and now private limited companies.

As per the Companies Act, 2013, it is mandatory for all listed companies to have their shares and other securities¹ in demat form for their smooth trading on Stock exchanges. The Ministry of Corporate Affairs (MCA), vide notification dated 10th September, 2018, inserted Rule 9A in the Companies (Prospectus and Allotment of Securities) Rules, 2014 (‘PAS Rules’), mandating every unlisted public company to hold and issue securities only in demat form.

1.“Securities” shall include all kinds of securities – shares, debentures, preference shares etc.

Recently, the Ministry of Corporate Affairs (MCA) vide notification No. GSR 802 (E) dated 27th October, 2023, has introduced Rule 9B after Rule 9A vide — Companies (Prospectus & Allotment of Securities) Second Amendment Rules, 2023 (‘Present Amendment’), and has extended such requirements for private companies.

Compliances under the new notification for the dematerialisation of the Securities shall have twofold co