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Dematerialization of Securities

Under the ever-evolving laws in India along with the dynamic business landscape, the Ministry of Corporate Affairs has recently mandated Dematerialization of securities for all the private limited companies incorporated in India, except for the *small companies to issue the shares in dematerialized form effective from September 30th 2024, and to facilitate the conversion of all their existing securities in dematerialized form by September 30th 2024.

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* A small company means a private limited company having a paid-up share capital of INR 40,000,000/- or less and turnover not exceeding INR 400,000,000/- in the immediately preceding financial year. However, below are the exceptions:

  • A holding or a subsidiary company
  • A company registered under section 8 of the Companies Act
  • A body corporate or company governed by any special act

What is Dematerialization of Shares?

Dematerialization: The conversion of physical securities into an electronic form maintained by governmentauthorized agencies, i.e. depositories, is called Dematerialization of securities or shares.

Due Date: September 30th, 2024

Benefits of Dematerialization of Shares

Dematerialization of shares has several advantages; the primary advantage is it increases convenience and security for the investors. It also minimized the risk of physical loss or damage of the share certificate. moreover, Dematerialization of shares or security make the whole process of transferring the ownership easy and transparent. It also increases efficiency. Some of the other advantages are listed below.

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Process of Dematerialization of Securities

  • Step 1 Obtaining ISIN and identification of Registrar and Transfer Agents (RTA) for availing services.
  • Step 2 Obtaining PAN for shareholders, if not available.
  • Step 3 Identification and finalization of depository participants (DP) to avail the depository related services.
  • Step 4 Application for converting the physical shares to dematerialized form with the DP.
  • Step 5 Generation of account number and ID to access Demat account.

Repercussions of non-compliance

  • Restriction on issuance and transfer of shares by the shareholders of a Private Limited Company.
  • Penalty: The company and its Officers/Directors shall be liable to pay the penalty of ?10,000 + ?1,000 for each day till the violation continues, subject to a maximum penalty of ?2,00,000 for the Company and ?50,000 for the officer in default.

What services does AKM offer?

  • Assistance in availing of a Permanent Account Number (PAN) for each shareholder from the Income Tax department.
  • Identify Registrar and Share Transfer Agents (RTA) and obtain the International Securities Identification Numbering system (ISIN) for each type of securties.
  • Assistance in identifying depository participants for opening Demat accounts for each shareholder and related coordination.
  • Dematerialization of Securities.
  • Tracking and monitoring recurring compliances associated with shares such as semi-annual reporting with the authorities, maintenance of registrar of members and transfers, and obtaining BENPOS reports, as and when required.

FAQs

Conversion of Physical securities into electronic form is known as dematerialization of securities.

September 30th, 2024.

Yes, AKM Global has a dedicated team of qualified company secretaries who is helping a lot of companies in India to get their shares dematerialized.

Yes, the company and its Officers/Directors shall be liable to pay the penalty of ?10,000 + ?1,000 for each day till the violation continues, subject to a maximum penalty of ?2,00,000 for the Company and ?50,000 for the officer in default.