Dematerialisation of Shares for Private Limited Companies
- Assessment of dematerialisation applicability, classification checks (small vs non-small company), and guidance on meeting MCA’s regulatory deadline of September 30, 2024.
- Drafting resolutions to amend the AoA for enabling demat, and assistance in obtaining International Securities Identification Numbers (ISIN) for company securities.
- Assistance in appointing SEBI-registered Registrar & Transfer Agents (RTA), and establishing links with CDSL/NSDL depositories for streamlined share demat processing.
- End-to-end support for opening Demat accounts, collecting Demat Request Forms (DRFs), and managing document verification and submission for all stakeholders.
- Filing of Form PAS-6 for half-yearly demat reporting to MCA, and continued compliance support to ensure timely reporting, DRN tracking, and demat confirmations.
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What is Share Dematerialisation?
Dematerialisation converts physical share certificates into electronic form held in a Demat account. Governed by SEBI and the Depositories Act 1996, this process:
- Eliminates risks of loss/theft/damage to physical shares
- Enables instant trading and transfers
- Simplifies corporate actions (dividends, bonuses, splits)
- Mandatory for most private companies by September 30, 2024
CA Vakeel ensures seamless transition from physical to digital shares.
MCA's Dematerialisation Requirement
Under Rule 9B of Companies (Prospectus & Allotment of Securities) Rules:
- All private companies (except small companies) must dematerialise shares.
- Small company exemption: Paid-up capital ≤₹4Cr AND turnover ≤₹40Cr.
- No exemption for holding/subsidiary companies regardless of size.
- Promoters/directors must dematerialise shares before new issuances.
*Penalties apply for non-compliance after September 30, 2024.*
Which Companies Must Dematerialise Shares?
| Company Type | Must Dematerialise? | Conditions |
|---|---|---|
| Private Ltd. | Yes | Paid-up >₹4Cr OR turnover >₹40Cr |
| Holding/Subsidiary | Yes | Regardless of size |
| Small Company | No | Paid-up ≤₹4Cr AND turnover ≤₹40Cr |
| Government Co. | Exempt |
Dematerialisation Deadlines
- Standard Deadline: September 30, 2024 (for March 31 FYE companies).
- Other FYE Companies: 18 months after financial year-end:
- December 31 FYE → June 30, 2025
- June 30 FYE → December 31, 2025
Late compliance risks fines + share transfer restrictions.
How to Dematerialise Shares in 6 Steps
Step 1: Amend Articles of Association (AOA)
- Add clauses permitting electronic shareholding.
Step 2: Appoint RTA (Registrar & Transfer Agent)
- Engage SEBI-registered RTA (e.g., KFintech, Link Intime).
Step 3: Obtain ISIN
- Apply for Unique International Security ID via RTA.
Step 4: Open Demat Accounts
- Shareholders open accounts with NSDL/CDSL depository participants.
Step 5: Convert Physical Shares
- Shareholder submits:
- Physical share certificates
- Demat Request Form (DRF)
- PAN/Aadhaar copies
- RTA verifies + destroys physical certificates.
- Shares credited to Demat accounts.
Step 6: File PAS-6 with MCA
- Submit half-yearly compliance report on demat status.
Advantages of Going Digital
- 🔒 Enhanced Security: No physical certificate risks.
- ⚡ Faster Transfers: Settle trades in T+1 days.
- 💰 Lower Costs: Eliminate stamp duty/printing charges.
- 📊 Auto-Updates: Corporate actions are reflected instantly.
- 📈 Loan Collateral: Easier share pledging for financing.
- 🌐 Global Compliance: Meets SEBI/international standards.
Risks of Missing Deadlines
| Violation | Penalty |
|---|---|
| Company Default | ₹10,000 + ₹1,000/day (max ₹2L) |
| Officer Default | Up to ₹50,000 |
| Share Transfer Restrictions | Cannot issue new shares or approve transfers |
| Bonus/Buyback Ban | Corporate actions blocked |
Stress-Free Dematerialisation Service
CA Vakeel delivers: End-to-End Management: AOA amendments → PAS-6 filing. RTA Coordination: NSDL/CDSL tie-ups for swift ISIN issuance. Shareholder Onboarding: Bulk Demat account opening support. Compliance Monitoring: Deadline alerts + penalty protection. Dispute Resolution: Document verification & mismatch fixes.
*"We’ve dematerialised 10M+ shares for 500+ companies with 100% SEBI compliance."*