Compulsory Dematerialization Of All Securities Required By September 30, 2024

BTG Advaya


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The Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023 ("PAS Rules 2023") were issued in October 27, 2023...
India Corporate/Commercial Law
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The Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023 ("PAS Rules 2023") were issued in October 27, 2023, requiring mandatory dematerialisation of all securities of every private Indian company (except small companies) by September 30, 2024. This obligation is also incumbent on the holders or any securities.

In brief, Dematerialisation is the process by which physical security certificates are converted into electronic balances. In order to dematerialise your company's securities, please see below a brief process involved to be followed by the Company and its the shareholders/security holders with various third parties, viz. Depository Participant ("DP"), Registrar and Transfer Agent ("RTA") and one or more of the depositories in India, viz. National Securities Depository Limited ("NSDL") and Central Depository Services Limited ("CDSL").



  • Obtaining an ISIN requires submission of various documents, such as audited financials for the preceding year, PAN & TAN of the company, GST certificate, net-worth certificate, etc.
  • If the shareholder does not have a PAN card, it can be applied for, as part of the process.

Next Steps: BTG Advaya's in-house company secretarial team can help you with the above process. We offer the following support services:

  • Obtaining ISIN, including support for engagement of RTA, drafting assistance for resolutions, collation and submission of requisite documents, co-ordination with the RTA, etc.
  • Obtaining PAN for a shareholder, if needed, comprising collation of documents, submission with authorities, and correspondence.
  • Support on setting up demat account, including co-ordination with the DPs for the shareholder.
  • Support on dematerialisation of physical certificates to electronic forms with the DP, includes support on submission of DRF, liaise with the DP and the Company, etc.

Risks and consequences of non-compliance: Please see below brief risks and consequences of not complying with the PAS Rules, 2023.

On the Company:

  • Monetary Penalty: If the Company fails to obtain ISIN by September 30, 2024, the Company shall be liable to a penalty ranging between INR 10,000 – INR 200,000, and every officer in default shall be liable to a penalty ranging between INR 10,000 – INR 50,000.
  • Restriction on Further Issuance: The Company can only issue securities in demat form with effect from October 1, 2024, therefore, Company will not be able to issue any securities unless they have obtained ISIN.

On the Shareholder:

  • Holding of securities and subscribing to new issuances: The shareholders of a private company can continue holding their existing securities in physical form even after September 30, 2024, however, from October 1, 2024, they would need to have a demat account to subscribe to any new security issuance by the Company.
  • Restriction on transfer of securities: The shareholders cannot transfer their existing securities to any person, unless the shareholder itself (i.e., the seller), as well as the purchaser of the securities have demat accounts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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