India: larger private companies must hold all securities in demat form
Under rule 9B of the Companies (Prospectus and Allotment of Securities) Rules 2014, inserted in October 2023, Indian private companies that are not small companies had to issue securities only in dematerialised form and dematerialise existing holdings. The deadline was 18 months after the financial year end, 30 September 2024 for most. The MCA later extended it to 30 June 2025.
The Ministry of Corporate Affairs (MCA) inserted rule 9B into the Companies (Prospectus and Allotment of Securities) Rules 2014 by notification G.S.R. 802(E) of 27 October 2023. It extends to private companies the dematerialisation regime already applying to unlisted public companies.
What changed
- Private companies that are not small companies (or government companies) must issue securities only in dematerialised form and help holders dematerialise all existing securities.
- They must comply within 18 months of the end of the financial year in which they were not a small company. For companies that were not small at 31 March 2023, that was 30 September 2024.
- Promoters, directors and key managerial personnel must hold their securities in demat form before certain transactions, and companies obtain an ISIN through a registrar and transfer agent.
Who is affected
Indian private companies above the small-company thresholds, their shareholders and company secretaries.
Later developments
On 12 February 2025 the MCA extended the deadline to 30 June 2025 (G.S.R. 131(E)), after delays in ISIN allotment by depositories. Producer companies have until 31 March 2028.
Sources
- Ministry of Corporate Affairs: G.S.R. 802(E), 27 October 2023
- AZB & Partners: Compulsory dematerialisation of the shares of a private company (November 2023)
- JSA: Extension in the timeline for mandatory dematerialisation of securities for private companies till 30 June 2025 (February 2025)
- AZB & Partners: MCA amends Companies (Prospectus and Allotment of Securities) Rules, 2014