India: Mandatory dematerialisation of shares & debentures of private limited companies


published on 16 November 2023 reading time approx. 2 minutes

Under Indian law regime, every company incorporated under the Indian Companies Act, 2013, which is limited by shares, is required to issue certain types of securities to its stakeholders. For example, equity shares, preference shares, debentures etc., depending upon various factors. Till now, only public limited companies were required to issue these securities in dematerialized form and private limited companies were exempted and hence could issue their securities in the form of a physical document. 

However, with effect from 27 October 2023, the Ministry of Corporate Affairs, Government of India, has made it mandatory for private limited companies also to issue their securities in dematerialized form starting from 30 September 2024 and to facilitate conversion of all their existing securities in dematerialized form by 30 September 2024. Small Companies are exempted from this requirement. 




What is dematerialization of securities

Dematerialization of securities means the conversion of physical securities into an electronic format which is maintained by the dedicated depositories authorized by the Government of India. In this context, securities include any kind of shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a similar nature.

To whom does this new requirement apply?

  • All the private limited companies (other than small companies) incorporated in India.
  • Shareholders and debenture holders of the private limited companies (other than small companies) 
Note: A small company means a private limited company having a paid-up share capital of INR 5,000,000 or less and turnover not exceeding INR 20,000,000 in the immediately preceding financial year. 
However, if your company is a holding company or a subsidiary company, then it will not be considered as a Small Company, even if it meets the above criteria.

What is the deadline for compliance?

18 months from the date of closure of financial year ending on or after 31 March 2023 i.e., 30 September 2024 or later depending on the company’s financial year end.

What needs to be done?


For a private limited company, which is a subsidiary of a foreign company 

  • By 30 September 2024, the company must convert all types of shares and debentures into dematerialized form by making the necessary application to a depository and securing International Security Identification Number (ISIN) for each type of security and shall notify all its existing security holders of this facility.
  • All the further issues and transfers of shares and debentures made after 30 September 2024 shall be made only in dematerialized form. 
  • File form PAS – 6 (Reconciliation and Share Capital Audit Report) with the Registrar of Companies (ROC) within 60 days of the end of each half year.

For a securityholder of a private limited company

  • The holders of shares of a private limited company must get a demat account opened with the authorized depository for holding the dematerialized securities therein. 
  • Ensure that their existing securities in (a) private limited company(ies) are dematerialized before transferring them or subscribing for new shares, after 30 September 2024. 

What are the penalties for non-compliance?

In case the company or the security holders do not comply with the requirement to dematerialize their securities by 30 September 2024, the following consequences will apply:
  1. The company will not be able to issue/allot any type of securities. 
  2. The security holder will not be able to transfer or subscribe for any type of security.
  3. Monetary penalties on company and every officer in default:
      • On the company: INR 10,000 + INR 1,000 for each day violation continues. Maximum limit is INR 200,000 
  • Every officer of the company who is in default – same as above. Maximum limit is INR 50,000
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