COMPANY LAW FAQs on dematerialization of physical share certificates

FAQs on dematerialization of physical share certificates

FAQs on dematerialization of physical share certificates


Q.: What's the Governing Law?

Section 29 read with Rule 9A of the businesses (Prospectus and Allotment of Securities) Rules, 2014.

Q.: From when is Rule 9A effective?

02nd October 2018.

Q.: What does Rule 9A state?

Every unlisted public company shall –

  • issue the securities to their investors, only in dematerialized form; and
  • they should also facilitate dematerialization of all their existing securities, as per the provisions of the Depositories Act, 1996 and regulations made thereunder.

Q.: How long it takes to dematerialize the shares?

Dematerialization will ordinarily take around 30 days. On the off chance, if the method takes quite 30 days, you need to contact your DP. If he can't support you, at that time you'll be able to send your complaint to the individual Investor complaint cell of NSDL or CDSL.

Q.: Can multiple accounts be opened?

YES, A trader can open over one account during a similar name with the same DP and furthermore with various DPs. For these accounts, the financial specialist must carefully consent to KYC standards including Proof of Identity, Proof of Address necessities as stipulated by SEBI and furthermore give PAN number. The trader has to show his PAN card at the hour of opening of Demat account.

Q.: Do I want to take care of any minimum balance of securities in my account with DP?

No, no minimum balance has been prescribed by the. you'll be able to have zero balance in your account.

Q.: Can an investor close his one Demat account and transfer all securities to a unique account with another DP?

Yes, an account closure request shall be submitted by the investor, to his DP within the given format. Further, the DP will transfer all the securities lying within the account, as per the instruction, and shut the Demat account.

Q.: Can I convert my electronically held Demat shares into physical form?

Yes, you'll be able to convert your Demat holdings into physical form. you wish to submit a Rematerialsation Request Form (RRF) through your DP within the same manner as Dematerialization. Upon receipt of such asking from the DP, the R&TA of the corporate will issue share certificates to you. However, before the transfer of such shares, the identical will must be dematerialized as per the method.

Q.: What are the key features of Rule 9A?

  • Every unlisted public company shall issue the securities only in dematerialized form and facilitate the dematerialization of all its existing securities (obtain ISIN for every sort of security).
  • Before making any offer for the difficulty of any securities by the unlisted public company, the complete holding of securities of its promoters, directors, KMP is in Demat form.
  • Every securities holder of an unlisted public company shall get his securities in Demat form before transferring to someone or subscribing to any issue of securities.
  • Submission of reconciliation of share capital audit report in Form PAS-6.

Q.: Whether obtaining Demat connectivity is mandatory for a public company?

I’ve got a public company that isn't working or have limited operations, whether I would like to get Demat connectivity?

Q.: Will I be able to convert my public company Ld. into a private limited to avoid dematerialization?

You can convert your public company into a private limited but just in case your company was incorporated before 30th September 2019, then the necessity of filing of Form PAS-6 would have triggered for half-year ending September 2019 and March 2020 and while you may convert into a private company, non-filing of Form PAS-6 for the said half-years will result in result in default of provisions of Rule 9A.

Q.: Whether a personal company is required to convert its shares into Demat?

No, as Rule 9A applies only to unlisted public companies, the private company isn't required to convert its shares into Demat. However, it is advisable that the private company shall facilitate the Demat connectivity to its shareholders.

Q.: If a personal company may be a subsidiary of an unlisted public company, is it required to convert its shares into Demat?

Yes, as a personal company that may be a subsidiary of a public company are going to be considered a deemed unlisted public company and so it's required to convert its shares into Demat.

Q.: Whether Rule 9A applies to Section 8 companies?

Yes, if section 8 company could be a public company.

Q.: What shall be consequences on the company and shareholders, if they don’t convert shares into Demat?

The company cannot come up with the following:

  • Issue of latest securities including offering and bonus issue; and
  • Buyback of securities
  • The shareholder cannot transfer their securities.

Q.: If transfer executed before 02nd October 2021, but documents haven't been delivered before such date. Whether the corporate is often registered for such transfer after 02nd October 2021?

While Rule 9A prohibits the transfer of shares in physical after 2nd October 2021 but the Board can consider the transfer of shares in physical within the said situation and considering the circumstances of the case.

Q.: what's the procedure for obtaining Demat connectivity by the company?

  • Hold a meeting to think about and approve the proposal for obtaining DEMAT connectivity for securities with the depositories;
  • Appoint a Registrar and agency (RTA);
  • After the appointment of RTA, the corporation shall file an application together with relevant documents with the depository for obtaining DEMAT connectivity;
  • the corporate, depository and RTA shall enter into Tripartite agreement in respect of securities that are to be declared as eligible to be held in dematerialized form;
  • After verification of the applying and other documents, the depository will provide the DEMAT connectivity to the corporate and allocate ISIN to the securities of the company;
  • Then, the shareholders of the corporate may approach the RTA for the dematerialization of their securities.

Q.: Whether a company is compulsorily required to appoint a Registrar & agency (RTA)?

No, but in such case, a corporation will need to purchase the software from a relevant depository

Q.: Whether it’s necessary that Articles should contain a provision for issuance of shares in Demat form?

No, just in the case of a public company and yes, just in the case of a personal company.

Q.: Whether Demat connectivity from both NSDL and CDSL is required?

No, the company may take Demat connectivity from anyone depository but all of its shareholders shall have the Demat account in this depository only otherwise the shareholder can’t dematerialize its shares.

Q.: What all Unlisted Public Companies have been exempted from dematerialization of securities issued by them?

  • Nidhi Company;
  • Government company; and
  • Wholly owned subsidiary.

Q.: If shares are held by two or more Government Companies in the equal ratio in an unlisted public company. Will the exemption be applicable for such companies?

The exemption is simply for state Companies. As per the definition of ‘Government Company’, it includes a corporation which may be a company of a Government Company. Hence, if quite 50% of shares are held by a Government Company, then such unlisted public company is eligible to require exemption from Rule 9A.

Q.: A Ltd could be a wholly-owned subsidiary and it intends to allot shares to person aside from the company, whether compliance with Rule 9A is required? Whether promoter, director or KMP is required to dematerialize all securities held by them or class of securities, which the corporate intends to issue?

Before issuing any shares, all the securities whether equity shares, stock or debentures, held by a promoter, director or KMP is required to be dematerialized.
Form PAS-6

Q.: Who shall file PAS-6?

Every unlisted public company shall submit Form PAS-6 to the Registrar of companies within 60 days from the conclusion of every half year.

Q.: Which Companies are exempted from filing of PAS-6?

  • Nidhi Company;
  • Government company; and
  • Wholly owned subsidiary.

Q.: Whether a personal company is required to file Form PAS-6 if it's taken Demat connectivity? When the shape PAS-6 has been deployed on MCA Portal?

Form PAS-6 has been effectively and readily available for investors from 15th July 2020.

Q.: what's the date for filing PAS-6?

60 days from the date of the conclusion of every half year. i.e., Half-year ended 31st March: 30th May; and Half year ended 30th September: 28th November.

Q.: what's the maturity for filing PAS-6 for previous periods?

MCA vide Circular No. 16/2019 dated 28th November 2019 had stated that the closing date for filing Form PAS-6 (Half-yearly Reconciliation of Share Capital Audit Report) without additional fees for the half-year ended on 30th September 2019 is 60 days from the date of deployment of this way on MCA-21 portal.

Accordingly, the last date for filing the shape PAS-6 for the half-year ended on 30th September 2019 and 31st March 2020 was 13th September 2020. If the shareholders of an unlisted public company haven't yet converted their shares in Demat Form? Whether such a company has to file PAS-6?

Q.: what's an ISIN?

ISIN (International Securities Identification Number) could be a unique 12-digit alphanumeric number allotted for security (e.g., INE08FZ08013). It is provided that – Equity shares fully paid up, equity shares partly paid up, equity shares with differential voting /dividend rights, issued by the identical issuer, shall bear different ISINs.

Q.: If a corporation has not yet obtained ISIN. Can they obtain it now?

Yes, an organization can obtain ISIN now.

Q.: a corporation has issued different classes of preferred shares. Whether ISIN for every class is required to be obtained?


Q.:With reference to which security, the small print has to be provided in Form PAS-6?

In Form PAS-6, all details shall be given relation to security, the ISIN of which is provided within the form.

Q.: Does the shape PAS-6 apply to debentures also together with equity and preference share capital?

No, because the form name suggests, it pertains to share capital only.

Q.: Whether a single form is filed for 2 or more ISIN?

No, a different form has to be filed.

Q.: Whether Form PAS-6 may be filed after 13th September 2020 under CFSS?


Q.: In Column no. 5 of the shape, does it require details for a particular period i.e., for the half-year ended or for the complete issued capital together with Demat information?

It requires details for the whole issued capital together with Demat information.

Q.: In Column no. 8 of the form whether it requires the small print of shares held by promoters/ Directors/KMPs for the half-year ended or for the complete holding?

It requires details for the complete holding.

Q.: A promoter is additionally a director of the corporate, so what shall be the way to provide details of shareholding in column no. 8, involving details of shares held by promoters, directors and KMP?

Mention the number of shares held both for promoter and director

Q.: Column no. 10 requires to verify whether there have been dematerialized shares in excess within the previously half-yearly period, does it require to say whether there has been any additional allotment/conversion of physical shares within the Demat form for the half-year ended on 30th September 2020 or 31st March 2020?

It refers to a situation where shares are dematerialized in excess than required.

Q.: Can we attach any documents/support in PAS-6?

No, there's no must attach anything within the style of PAS-6.

Q.: Who can certify the shape PAS-6?

Practising Company Secretary or A Practicing accountant is permitted to certify the shape PAS-6.

Q.: Can we fill ‘Z999999999’ rather than ISIN in Form PAS-6?

Technically, the form is also filed. However, this activity will attract sections 447 & 448 (Punishment for fraud and false statement) on a part of the corporate moreover practising professional who certified the shape.

Q.: What are the penal provisions for not filing PAS-6?

As there's no penalty prescribed under rule 9A for non-compliance, therefore Section 450 of Companies Act, 2013 (punishment where no specific penalty or punishment is provided) are applicable.

Under Section 450, the company along with the officers in default, or such other person, shall be punishable with a fine which can touch Rs. ten thousand, and where the contravention is a constant one, with an additional fine which can be Rs. one thousand for each day after the primary during which the contravention continues.

Disclaimer: The content of this post isn't considered to be professional or legal advice, We aren't responsible for any damages arising from your access to the location content & must not be relied on or used as a substitute for legal advice from a lawyer professional in your jurisdiction. CARajput is among India's big digital compliance services platform which committed to helping people have started & developed their businesses. We had started with the goal of creating it easier for start-ups to start out their business. Our main aim is to assist the businessman with applicable laws & regulations compliance and providing support at each & every level to make sure the business stays compliant and growing continuously. For any query, help or feedback you may in touch on or Call or what’s-up on 9-555-555-480

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