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Issue of Securities In Dematerialised Form By Unlisted Public Companies

Corporate Law Consultant in Mumbai
Author: CS Amita Alke
Posted On: Thursday 20 September 2018

Tags: dematerialisation shares unlisted public company notification MCA Ministry of Corporate Affairs depository DEMAT private company Companies (Prospectus and Allotment of Securities) Rules, 2014

As per recent amendment issued by Ministry of Corporate Affairs on September 10, 2018, following Rule (Rule 9A) has been inserted after Rule 9 of Companies (Prospectus and Allotment of Securities) Rules, 2014 –

‘Every Unlisted Public Company shall issue its securities in dematerialized form and facilitate dematerialization of all its existing securities as well.’ 

  1. WHAT IS DEMTERIALISATION OF SHARES:-

A paperless form of trading in shares whereby share transactions and transfers are processed electronically without involving any share certificate or transfer deed after the share certificate has been converted from physical to electronic form.

An investor who wants to dematerialize his share needs to open DEMAT account with depositary participant (a market intermediary through which investors can avail depository services). Investor surrenders his physical shares and get electronic shares in turn to his demat account. 

  1. APPLICABILITY OF DEMATERIALISATION:-
  • This rule shall be applicable with effect from October 02, 2018.
  • Every Unlisted Public Company ;
  • Every Private Company which is a Subsidiary of Public Company (deemed to be a Public Company) ;

is mandatorily required to dematerialize its existing securities as well as new issue of securities. 

  1. WHEN IT IS APPLICBALE:-
  • Every unlisted public company making an offer for issue of securities or buyback of securities or issue of bonus shares or rights issue shall ensure that entire holding of securities of promoters, directors and key managerial personnel has been dematerialized before such issue.
  • Every shareholder of unlisted public company who is willing to transfer its shares or who subscribes to any securities (whether by private placement or rights issue or bonus issue) on or after October 02, 2018 shall get its securities dematerialized before such transfer.
  1. ADDITIONAL INFORMATION:-
  • Every unlisted public company shall ensure timely payment of fees to the depository and registrar to an issue and share transfer agent as per the agreement executed by both the parties.
  • It needs to maintain the amount of not less than two years’ fees of deposit of securities with depository and registrar to an issue and share transfer agent at all times.
  • No unlisted public company shall make offer of any securities or buyback its securities or make any bonus or rights issue until the payments to depositories or registrar to an issue or share transfer agent is made.
  • The audit report shall be submitted by the unlisted public company on a half – yearly basis to the Registrar.
  • Any grievances of security holders of unlisted public company under this rule shall be filed before the Investor Education and Protection Fund Authority.

This is a quick, efficient, transparent and paperless form of holding of securities and hence we suggest all the Unlisted Public Companies to dematerialize their shares at the earliest to avoid any penalties or fees.

Author: Ruchi Mehta

Associate

Please feel free to write to us on ruchi@apmh.in / amita@apmh.in for any further queries on the above

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