Around 5 years ago, MCA introduced rule 9A to the Companies (Prospectus and Allotment of Securities) Rules, 2014 and made it mandatory for unlisted public companies to dematerialize their securities. With an intent to have more uniformity and transparency in maintaining the securities, On same lines, MCA has recently introduced rule 9B via Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023 (hereinafter ‘the said rules’) to make it mandatory for private companies to dematerialize their securities. In this article, we will discuss the requirements of dematerialisation of securities by private companies.
Sub rule 9B (2) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 has made it mandatory for every private company other than a small company and a government company (hereinafter ‘the concerned company’) to facilitate dematerialisation of all its securities, in accordance with provisions of the Depositories Act, 1996 and regulations made thereunder, within 18 (eighteen) months of closure of the financial year.
The applicability of aforesaid rule has to be determined basis the audited financial statement on or after March 31, 2023.
To illustrate the applicability of the timelines:
A: If ABC Private Limited breaches the threshold of a small company as on March 31, 2023, then ABC Private Limited shall be required to comply with the above-mentioned provisions by September 30, 2024.
B: If ABC Private Limited has raised its paid-up share capital to more than INR 40 million on t April 1, 2023, in such case, although it shall not be treated as a small company w.e.f. 1st April, 2023, but for the purpose of rule 9B (2), 18(eighteen) months shall be calculated from 31st March, 2024. Hence, ABC Private Limited would need dematerialise its securities by September 30, 2025.
Once the concerned company is required to comply with the said rules, it shall ensure that before making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer, its entire holding of securities has been dematerialised.
The concerned company shall also be required to submit reconciliation of share capital audit report (in e-form PAS-6) to the Registrar of Companies within 60 (sixty days) from the conclusion of each half year. Below are the due dates to submit the e-form PAS 6
| Relevant period | Due date |
| From April 1 to September 30 | November 29 |
| From October 1 to March 31 | May 30 |
The e- form PAS 6 needs to be duly certified by a company secretary in practice or chartered accountant in practice.
It is also pertinent to note that the security holder of the concerned company is also required to get their securities dematerialised by opening a demat account with a depository participant prior to transferring any securities or subscribing to the securities by way of private placement or bonus shares or rights offer of the concerned company.
For further information on this topic please write to us at info@clacorpservices.com
Disclaimer – The content is intended to provide a general guide on the subject matter.
__________________
1 small company: means a company, other than a public company, whose paid-up share is less than INR 40 Million and turnover is less than INR 400 Million.
