MCA extends deadline for mandatory Demat of Private Company shares until 30th June 2025

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In a significant move, the Ministry of Corporate Affairs (MCA) has extended the deadline for mandatory dematerialization of securities for certain private companies until June 30, 2025. This extension, announced through a notification dated February 12, 2025, grants more time for compliance under the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2025, which modifies the existing Companies (Prospectus and Allotment of Securities) Rules, 2014
In a significant move, the Ministry of Corporate Affairs (MCA) has extended the deadline for mandatory dematerialization of securities for certain private companies until June 30, 2025. This extension, announced through a notification dated February 12, 2025, grants more time for compliance under the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2025, which modifies the existing Companies (Prospectus and Allotment of Securities) Rules, 2014

The Ministry of Corporate Affairs (MCA) has officially extended the deadline for the mandatory dematerialization of securities for private companies.

According to the latest notification issued on February 12, 2025, the new compliance deadline has been pushed to June 30, 2025.

This amendment revises the Companies (Prospectus and Allotment of Securities) Rules, 2014, specifically Rule 9B, which mandates dematerialization for specific categories of private companies.

The official Notification is attached here for reference:

Key Highlights of the MCA Notification

Extension until June 30, 2025

  • The deadline for compliance with Rule 9B (2) has been extended from March 31, 2023, to June 30, 2025.
  • This provides private companies (other than small and producer companies) with more time to complete the dematerialisation of securities and obtain ISIN (International Securities Identification Number).

Applicability of the Rule

  • All private companies, excluding small companies and producer companies, are required to comply.
  • Companies that intend to issue new shares, transfer shares, or make any alterations in their capital structure must do so only in dematerialised form.

The objective of the Amendment

  • To ease the transition for private companies that have not yet complied.
  • To ensure greater market transparency and alignment with regulatory frameworks for public companies.
  • To facilitate smooth investor participation and digital securities transactions.

What is the Dematerialization of Shares?

Dematerialization is the process of converting physical share certificates and other securities into an electronic format, eliminating the need for paper-based documents. Once dematerialized, these securities are held in a demat account, which functions like a digital repository for financial instruments.

A depository is an entity that holds securities in an electronic form and facilitates seamless transactions. It ensures security, transparency, and ease of trading. In India, depositories are governed under the Depositories Act of 1996 and regulated by the Securities and Exchange Board of India (SEBI).

The two SEBI-registered depositories in India are:

  • NSDL (National Securities Depository Ltd.) – Primarily linked with the National Stock Exchange (NSE).
  • CDSL (Central Depository Services (India) Ltd.) – Associated with the Bombay Stock Exchange (BSE).

Rule 9B: Mandatory Dematerialization of Securities for Private Companies

In October 2023, the Ministry of Corporate Affairs (MCA) introduced Rule 9B under the Companies (Prospectus and Allotment of Securities) Rules, 2014. This regulation made it mandatory for certain private companies to dematerialize their securities, aligning them with corporate governance standards applicable to public companies.

Applicability of Dematerialization of Shares

The dematerialization of shares applies to various entities within the securities market, ensuring transparency, security, and ease of transactions.

Public Companies

All public companies in India are mandated to hold and transact their securities in dematerialized form.

Private Limited Companies

All private limited companies, except those categorized as small companies, must comply with dematerialization regulations.

Holding and Subsidiary Companies

  • Any private limited company that is a holding company or a subsidiary of another corporate entity must dematerialise its shares.
  • This applies even if the company qualifies as a small company under financial thresholds.

Small Companies – Exception to Dematerialization

A small company is defined as a private limited company that meets the following financial criteria:

  • Paid-up capital: INR4 crore (INR 40,000,000) or less
  • Turnover: INR40 crores (INR 400,000,000) or less in the preceding financial year

Small companies are exempt from mandatory dematerialisation unless they are:

  • A holding company of another entity
  • A subsidiary company of another corporate body

In these cases, they must comply with dematerialisation requirements, irrespective of their financial position.

Last date for Dematerialization of Physical Shares

Considering the challenges faced by companies in executing the dematerialisation process, the Ministry of Corporate Affairs (MCA) has extended the compliance deadline. The new last date for mandatory dematerialisation of shares is June 30, 2025, revised from the earlier deadline of September 30, 2024.

Implications of the Deadline Extension for Private Companies

  • For Non-Compliant Private Companies: Companies that have not obtained their ISIN or completed dematerialisation now have extra time to comply. They must coordinate with depositories (NSDL/CDSL), registrar & transfer agents (RTAs), and professionals to initiate the dematerialisation process.
  • For Companies already in Compliance: Those who have already obtained their ISIN and dematerialised securities will not be affected. However, they should continue ensuring that any new share issuance or transfer occurs only in dematerialised form.

How to Convert Physical Shares into Demat?

Converting physical share certificates into electronic form is a simple and efficient process. Below is a step-by-step guide to help complete the dematerialization process:

Step 1: Open a Demat Account

To begin, you need to open a Demat account with a Depository Participant (DP), such as a bank, stockbroker, or financial institution. This account will hold your shares in electronic form.

You must fill out an account opening form and provide essential details, including:

  • Bank account details (Account number, IFSC code, Bank name, and Branch address)
  • Identity and address proof
  • PAN card

Once your Demat account is successfully set up, you can initiate the dematerialization process.

Step 2: Submit a Demat Request Form (DRF)

Obtain a Demat Request Form (DRF) from your DP, complete it accurately, and sign it. Ensure that the names and signatures on the form match those on the share certificates and the company’s records.

Step 3: Verification and Processing

After submission, the DP will verify your details and issue a Dematerialization Request Number (DRN) to track the status of your request.

Step 4: Forwarding to Registrar and Share Transfer Agent (RTA)

Your DP will forward the dematerialization request along with your physical share certificates to the respective Registrar and Share Transfer Agent (RTA) of the issuing company.

Step 5: Conversion to Electronic Form

Once the RTA verifies and approves the request, your physical share certificates will be cancelled and converted into electronic form to prevent misuse.

Step 6: Credit to Your Demat Account

The dematerialized shares are then credited to your Demat account, allowing you to sell, transfer, or pledge them as needed.

Penalties for Non-Compliance with Dematerialization Requirements

Failure to comply with Rule 9B of the Companies Act, 2013, can result in serious consequences for private companies, including:

  • Restrictions on Securities Transactions: Companies failing to comply will be barred from issuing or allotting any securities, including those related to bonus issues and buybacks.
  • Limitations for Shareholders: Shareholders holding physical shares will be restricted from selling or transferring their securities. They may also lose eligibility for rights issues and dividend benefits.
  • Monetary Penalties for Companies
    • Penalties for Company Officers: Officers in default may face penalties of up to INR 50,000 for non-compliance.
    • Initial penalty: INR 10,000
    • Continuing penalty: INR 1,000 per day until compliance is met, up to a maximum of INR 200,000.

Conclusion

The extension of the dematerialisation deadline to June 30, 2025, provides much-needed relief for private companies, allowing them additional time to comply with Rule 9B of the Companies Act, 2013. Companies should take advantage of this extension to complete the demat process, obtain their ISIN, and ensure compliance to avoid penalties and restrictions on share transactions.  

Frequently Asked Questions (FAQs)

  1. What is the new deadline for the mandatory dematerialisation of private company shares?

The Ministry of Corporate Affairs (MCA) has extended the compliance deadline to June 30, 2025, from the earlier date of September 30, 2024.

  1. Which companies are required to dematerialise their shares?

All private limited companies, except those categorised as small companies, must comply with the dematerialisation requirements under Rule 9B of the Companies Act, 2013. Additionally, holding and subsidiary companies must also dematerialise their shares, regardless of their size.

  1. Are small companies exempt from the dematerialisation requirement?

Yes, small companies (those with a paid-up capital of INR4 crore or less and turnover of INR40 crore or less) are exempt. However, if they are a holding or subsidiary company, they must comply with the dematerialisation mandate.

  1. What happens if a company does not complete the dematerialisation process by the deadline?

Non-compliant companies may face:

  • Restrictions on issuing or allotting securities, including bonus shares and buybacks.
  • Limitations for shareholders, preventing them from selling or transferring physical shares.
  • Monetary fines of INR 10,000, with an additional INR 1,000 per day until compliance is met (up to INR 2,00,000).
  • Penalties for company officers, with fines up to INR 50,000.
  1. How can physical shares be converted into dematerialised form?

The dematerialisation process involves:

  1. Opening a Demat account with a Depository Participant (DP).
  2. Submitting a Demat Request Form (DRF) along with physical share certificates.
  3. Verification and processing by the DP and Registrar & Share Transfer Agent (RTA).
  4. Conversion to electronic format and crediting to your Demat account.
  1. Which depositories handle dematerialisation in India?

The two SEBI-registered depositories in India are:

  • NSDL (National Securities Depository Ltd.)
  • CDSL (Central Depository Services (India) Ltd.)
  1. Is dematerialisation required for new share issuances and transfers?

Yes, as per Rule 9B, all new share issuances and transfers must be conducted in dematerialised form. Companies that have already completed the demat process must ensure ongoing compliance for any future transactions.

  1. How to get help with the dematerialisation process?

You can get help from professional bodies that provide end-to-end assistance for companies looking to dematerialise their shares through NSDL/CDSL. They help in documentation, coordination with depositories, and compliance filing to ensure a seamless transition to electronic shareholding.

MCA Circular dated 2025 02 12

SEBI extends deadlines for filing financial results for Indian listed firms due to COVID-19

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SEBI made multiple relaxations for Indian firms, including market intermediaries and depositories, in terms of filing of financial details, disclosure on fund utilization and updating client records

The Securities and Exchange Board of India (SEBI), on Thursday, relaxed the deadline for listed Indian firms to announce their financial results in the wake of surging covid-19 cases in the so-called second wave of the pandemic in the country.

SEBI made multiple relaxations for Indian firms, including market intermediaries and depositories, in terms of filing of financial details, disclosure on fund utilization and updating client records.

In a circular, SEBI said listed Indian companies, which are currently required to announce their quarterly financial results within 45 days from the end of the quarter or by 15 May, 2021, are now allowed to file their March quarter results for fiscal 2021 by 30 June.

The deadline for filing annual audited financial results too has been extended by the markets regulator. Currently all companies are required to file their audited financials within 60 days from the end of the financial year, i.e. by 30 May. This deadline has been extended till 30 June, 2021 by SEBI.

“SEBI is in receipt of representations from listed entities, professional bodies, industry associations, market participants etc. requesting extension of timelines for various filings and relaxation from certain compliance obligations under the LODR (listing obligations and disclosure regulations) norms due to ongoing second wave of the CoVID-19 pandemic and restrictions imposed by various state governments,” said SEBI in its circular.

So far, 170-odd listed companies in India have announced their financial results for the March quarter and fiscal year 2021.

SEBI has also extended the deadline for companies to file their annual secretarial compliance report by a month till 30 June, 2021.

Also, the deadline for submitting the statement of deviation or variation in use of funds (along with the financial results) has been extended by a month till 30 June, 2021.

Source:SEBI Circular dated 29 April, 2021

SEBI extends deadline for filing April-June corporate financial results to September 15

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In a major relief to companies, the Securities and Exchange Board of India (SEBI) today extended the deadline for submission of financial results for the quarter, half-year, and financial year ended 30 June 2020 to September 15. The SEBI circular said that it has received representations requesting an extension of time for submission of financial results for the quarter or half year-ended 30 June 2020, due to the shortened time gap between the extended deadline for submission of financial results for the period-ended 31 March 2020 and the quarter or half year-ended June 30, 2020.

Under Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR Regulations’), a listed entity is required to submit its quarterly, half-yearly, or annual financial results within 45 days or 60 days, as applicable, from the end of each quarter, half year, or financial year.

Accordingly, listed entities were required to submit the financial results for the quarter, half-year-ended 30 June 2020 on or before 14 August 2020.

Earlier, the regulatory body had also extended the timeline for submission of financial results by listed entities for the quarter, half-year, or financial year-ended 31 March 2020 to 31 July 2020, due to the impact of the coronavirus pandemic.

SEBI further said that today’s announcement shall come into force with immediate effect and advised all stock exchanges to bring the provisions of this circular to the notice of all listed entities.

It has asked the stock exchanges to bring the provisions of the circular to the notice of all listed entities and also disseminate on their websites.

Meanwhile, SEBI’s move to relax the deadlines is expected to give more time to companies already struggling with operations part amid the pandemic.

In-line with the efforts to provide relief to the sagging businesses, Finance Minister Nirmala Sitharaman earlier announced to decriminalise some offences under the Companies Act.

The SEBI has also introduced new norms to give more fund-raising flexibility to stressed firms.

The amendments can help promoters get financial investors on board without losing control of the company.

SEBI signs MoU with CBDT for Data Exchange

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“There is a need to create a regulator or authority for data business, which provides centralized regulation for all non-personal data exchanges,” the government-appointed panel said in the report. Such a regulator would be armed with legal powers to request data, supervise data sharing requests and settle disputes“.
A formal Memorandum of Understanding (MoU) was signed today between the Central Board of Direct Taxes (CBDT) and the Securities and Exchange Board of India (SEBI) for data exchange between the two organizations.
 
The MoU was signed by Smt. Anu J. Singh, Pr. DGIT (Systems), CBDT, and Smt. MadhabiPuri Buch, Whole Time Member, SEBI in the presence of senior officers from both the organizations via video conference.

The MoU will facilitate the sharing of data and information between SEBI and CBDT on an automatic and regular basis.

In addition to regular exchange of data, CBDT and SEBI will also exchange with each other, on request and suo moto basis, any information available in their respective databases, for the purpose of carrying out scrutiny, inspection, investigation and prosecution,” SEBI said in a statement.

In addition to regular exchange of data, SEBI and CBDT will also exchange with each other, on request and Suo moto basis, any information available in their respective databases, for the purpose of carrying out their functions under various laws.

The MoU comes into force from the date it was signed and is an ongoing initiative of CBDT and SEBI, who are already collaborating through various existing mechanisms.

A Data Exchange Steering Group has also been constituted for the initiative, which will meet periodically to review the data exchange status and take steps to further improve the effectiveness of the data-sharing mechanism.

The MoU marks the beginning of a new era of cooperation and synergy between SEBI and CBDT.

In the past, SEBI has cracked on several entities who had manipulated the stock prices of listed companies. The regulator had observed in the penny stock scam that promoters and market operators were using the stock exchange platform to evade taxes and launder black money.

Read the Press Release: SEBI signs MOU with CBDT for Data Exchange

Govt approval must for all FDIs from neighboring countries including China, in same lines as made by several countries

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ASSOCHAM Secretary said that by amending the FDI rules through the Press Note No 3 , the Department for Promotion of Industry and Internal Trade, has not only brought the FDI proposals for greenfield investments but also infusion into the existing projects, under the ‘government route’

The government has amended the Foreign Direct Investment (FDI) policy to discourage opportunistic investment in Indian companies by neighbouring countries in the midst of the Coronavirus pandemic.

This comes after China’s central bank recently raised stake in Housing Development Finance Corporation (HDFC) to a little over 1 percent.

As per the new amendment, FDI investments into Indian companies from the neighbouring countries will now require a nod from the government. This will be applicable to all countries that share a land border with India – such as China among others.

The amendment specifies that transfer of ownership of Indian companies arising out of FDI investments from neighbouring countries will now also be subject to government approval.

Similar FDI restrictions were earlier placed on Pakistan and Bangladesh.

These changes were notified via a Press Note by the Department for Promotion of Industry and Internal Trade (DPIIT).

As per the note, “Government has reviewed the FDI policy for curbing opportunistic takeovers or acquisitions of Indian companies due to the current COVID-19 pandemic.”

The note states: “A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route.”

“Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment,” it said.

“In the event of the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction/purview of the mentioned sectors, such subsequent change in beneficial ownership will also require Government approval,” it added.

The decision will take effect from the date of Foreign Exchange Management Act (FEMA) notification.

Earlier, reports said that market regulator Securities and Exchange Board of India (SEBI) was monitoring equity transactions in India by Chinese companies and banks. Such transactions have come under the scanner at a time when the share prices of companies have dropped due to the economic impact of the coronavirus pandemic.

Globally, transactions by Chinese firms and institutions have come under scrutiny recently since the assets are being purchased at low valuations. Nations such as the US, Japan and Australia have already placed restrictions on Chinese companies buying assets.

Source:Amendment of FDI Policy

Large unlisted companies face quicker disclosure rule

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Large unlisted companies may have to make quarterly or half-yearly filings, like their listed counterparts, as the government is considering amendments to the Companies Act to mandate more frequent disclosures in the aftermath of the IL&FS collapse.

The ministry of corporate affairs (MCA) is expected to prescribe a threshold for the disclosure requirement as it does not want to burden all companies, as a bulk of them are small companies, sources told TOI. The idea is to track the systemically important companies, which pose a risk to the entire system. “It will be an enabling amendment and MCA will decide on timing and extent of disclosures later,” said a source.

The assessment in the government is that there is a massive lag, often up to 18 months related to annual filings by companies, many of which have been non-compliant in the past. An entity like the beleaguered IL&FS was not on the radar till it collapsed and MCA is hoping that periodic disclosures would reduce the chances of such failures going undetected. Currently, companies are required to annually file the consolidated financial statement, balance sheet, profit & loss account, annual returns, directors’ report and certified true copy of board resolution with the designated RoC.

The proposal to increase disclosures is expected to be part of a set of amendments to be taken up by a group of ministers chaired by home minister Amit Shah, with defence minister Rajnath Singh, finance & corporate affairs minister Nirmala Sitharaman, commerce & industry minister Piyush Goyal and law & justice minister Ravi Shankar Prasad among the nine members of the committee, sources told TOI.

The ministerial panel, referred to as alternate mechanism by the Narendra Modi administration, will largely look at the recommendations of the company law panel, which submitted its report. While MCA was pushing for the introduction of the Bill during the recently concluded Winter Session, the legislation will now be placed before the Parliament as soon as it is cleared by ministers. The ministry is hoping to introduce the Bill during the budget session.

Source: Times of India

SEBI action against auditors not ‘turf war’: Ajay Tyagi

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Capital markets regulator Sebi on Wednesday said its actions against auditors for faulty audits are within its “Parliamentary mandate”, and there is no question of “turf wars” on this issue.
SEBI Chairman Ajay Tyagi said the watchdog is working only to protect the interests of investors and limiting its actions to auditors of publicly listed firms.

In 2018, the regulator banned Price Waterhouse for two years from auditing any listed firm for its role in the Satyam Computer Services scam. However, the audit firm had successfully challenged the same in the Securities Appellate Tribunal and got the order quashed.

“It is our parliamentary mandate I would say to see that it is done and there is no trouble there. It goes to the basic issue of investor protection being the parliamentary mandate of Sebi,” he noted.

In November, the Supreme Court stayed a SAT order which had held that Sebi does not have the power to bar auditors.

“Our position is very simple — if they’re auditing listed companies based on which investors are investing, and if we find that that work has not been done properly and in investors’ interest, some audit firms should not be allowed to audit for sometime of the listed companies,” Tyagi said at an event here.

According to Tyagi, audit firms are important gatekeepers who help companies put out results and financial performance to the stock exchanges, based on which investors take the call whether to invest or not.

“It is not our case that Sebi is the agency which registers or regulates the auditors. It is nothing like that… We are not de-registering auditors. We don’t have the authority and we don’t wish to have that authority,” he said.

He also made it clear that Sebi’s expectation is that faulty audits should not lead to inflated profits or dividends.

Regarding IPO market, Tyagi said there has been an improvement in activities lately and that nearly a dozen issues of over Rs 15,000 crore are in the pipeline.

The regulator has given its wish-list for the budget to the finance ministry, includes ways to increase the activities in the corporate bond market, he said.