In a significant move toward financial transparency and digital governance, the Ministry of Corporate Affairs (MCA) has rolled out a game-changing mandate: private companies must now convert their physical securities into dematerialised (demat) form.
Introduced through a notification on October 27, 2023, Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014, aims to bring private entities in line with their listed counterparts. While public companies have long followed demat norms, this extension signals a broader push toward digital uniformity in corporate India.
So, who does this affect? The rule applies to all private companies—except those classified as “small companies.” For eligible firms, this means any fresh issue or transfer of securities must now happen entirely through demat mode. Furthermore, they must ensure that all existing securities are converted as well.
To ease the transition, the MCA extended the initial compliance timeline. Private companies now have until June 30, 2025, to meet the requirements. This window offers a crucial opportunity for companies to engage with depositories, register with a Registrar and Transfer Agent (RTA), and educate their shareholders on the new process.
The benefits? Dematerialisation not only reduces paperwork and fraud but also increases liquidity, simplifies compliance, and enhances investor confidence. However, it also demands planning, coordination, and some upfront investment in terms of time and resources.
As India continues its digital leap, this regulation is more than a compliance checkbox—it’s a step toward modernising the entire ecosystem of private equity ownership.