India: Dematerialization of shares
The Ministry of Corporate Affairs (“MCA”) has recently issued a notification on October 27, 2023 (“Notification”), amending the Companies (Prospectus and Allotment of Securities) Rules, 2014. Through this amendment, the MCA has mandated all private companies (other than small companies and Government companies) to dematerialize their existing securities and directed such companies to issue any further securities in dematerialized form. This requirement needs to be complied with by all the private companies (other than small companies and Government companies) no later than 30 September 2024.
Dematerialization of securities is a process by way of which physical share certificates are converted into electronic share certificates. Prior to this amendment, the requirement of dematerialization was mandatory for listed companies only.
Key changes and requirements
By way of the Notification, the requirement of dematerializing the Securities (defined below) is now applicable to all private limited companies. However, an exemption has been granted to:
Small Companies (defined below and determined based on the audited financial statement for the fiscal year ending March 31, 2023); and
Government companies.
You may also note that the requirement for dematerialization needs to be complied for:
The existing Securities of the company; and
Any further issuance of Securities by the company.
Based on the above, if the company incorporated under the Companies Act, 1956 or Companies Act, 2013, is not a small company or a government company, then such private limited company must dematerialize its shares latest by September 30, 2024.
How can we help?
The Computershare Governance Services dedicated global team of governance professionals can advise on the account set-up requirements with a Depositary Participant Bank that provides the dematerialization accounts required to maintain these digital shares and the associated annual fees. Additionally, Computershare’s leading entity management system GEMS provides its clients with a robust online tool to manage and track securities for their entities in a format that is easy to access and update.
Contact:
Please contact your dedicated Computershare Relationship Manager or send an email to globalentityservices@computershare.com for more information about how Computershare may assist you in responding to these new requirements.
This notice is provided by Computershare for general informational purposes only and is not intended and should not be construed as legal, regulatory, financial or tax advice. Computershare is not licensed or authorized to practice law in any jurisdictions and hence does not provide any legal advice and it does not hold itself out as doing so. Neither Computershare nor any of its affiliates or contributors accept any responsibility or liability for the quality, accuracy or completeness of any information contained in this notice. It is important that you seek independent professional advice relating to the subject matter of this notice before relying on it.