MCA Update on dematerialization of Private Limited Company
On October 27, 2023 MCA bring a notification on dematerialization of Private Limited shares
The Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023
Issue of securities in dematerialized form by private companies
Within 18 months of the end of the financial year ending on or after March 31, 2023, every private company, other than a small company as per audited financial statements for such financial year, must:
(a) Issue securities only in dematerialized form.
(b) Facilitate dematerialization of all its securities.
The following provisions of sub-rules (4) to (10) of rule 9A will also apply to private companies:
(a) Before making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer, the private company must ensure that the entire holding of securities of its promoters, directors, and key managerial personnel has been dematerialized.
(b) Any person who intends to be a member of the private company will now receive securities in dematerialized form only, and any transfer of securities will be in dematerialized form only.
(c) Every private company must facilitate dematerialization of all its existing securities by making the necessary application to a depository and securing an International Security Identification Number (ISIN) for each type of security. The company must then inform all its existing security holders about this facility.
(d) Every private company must:
(i) Make timely payment of fees to the depository and registrar to an issue and share transfer agent in accordance with the agreement executed between the parties.
(ii) Maintain a security deposit with the depository and registrar to an issue and share transfer agent in such form as may be agreed between the parties.
(iii) Comply with the regulations, directions, guidelines, or circulars issued by the Securities and Exchange Board of India (SEBI) or Depository from time to time with respect to dematerialization of shares of private companies and matters incidental or related thereto.
(iv) No private company that has defaulted in sub-rule (4) shall make an offer of any securities or buyback its securities or issue any bonus or right shares till the payments to depositories or registrar to an issue and share transfer agent are made.
(v) Except as provided in sub-rule (8), the provisions of the Depositories Act 1996, the SEBI (Depositories and Participants) Regulations, 2018, and the SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 shall apply mutatis mutandis to dematerialisation of securities of private companies.
(vi) Every private company governed by this rule shall submit Form PAS-6 to the Registrar within 60 days from the conclusion of each half year, duly certified by a company secretary in practice or chartered accountant in practice.
(vii) The company shall immediately bring to the notice of the depositories any difference observed in its issued capital and the capital held in dematerialised form.
(viii) Any grievances of security holders of private companies under this rule shall be filed before the Investor Education and Protection Fund Authority.
(ix) The Investor Education and Protection Fund Authority shall initiate any action against a depository or participant or registrar to an issue and share transfer agent after prior consultation with SEBI.
Compliances:
Filing of form PAS 6 within sixty days from the conclusion of each half year.
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