Mandatory Dematerialisation of Shares of Private Companies
Ministry of Corporate Affairs has mandated dematerialisation of Securities of Private Companies, which are not small company as per audited financial statements for financial year ending on or after 31st March 2023 within eighteen months from the close of such financial year.
Small company means a private company having paid up capital not exceeding Rs. 4 Crores and turnover not exceeding Rs. 40 Crores.
Private Companies which are required to comply with this requirement shall ensure dematerialisation of entire holding of securities of its promoters, directors, key managerial personnel before any making any further issue /buyback/bonus issue/right issue.
Holder of securities shall get his securities dematerialised before transfer/further subscription whether by way of private placement or bonus shares or rights offer.
Procedure of Dematerialisation of Securities:
- The company first appoints a SEBI-registered Registrar and Share Transfer Agent (RTA)
- Company shall choose to dematerialize the shares with either of the two depositories- NSDL/CDSL.
- Company shall submit the prescribed documents with Depository through RTA
- Company shall execute a Tripartite Agreement with RTA and NSDL/CDSL for Demat.
- Payment of prescribed charges with NSDL/CDSL as required.
- Obtaining ISIN from NSDL/CDSL
- Informing ISIN to shareholders to facilitate them to get their securities credited in their Demat account.
Cost of Dematerialisation:
Payment to NSDL/CDSL:
- One time joining fees: This is a one-time fee of NSDL/CDSL.
- Annual Custodial charges: based on paid up capital of private company
- Security Deposit: Equivalent to 2 years of Annual Custodial charges
Annual payment to Registrar and Transfer Agent
Hence, private companies other than small companies shall be required to get their shares dematerialised within 18 months from the end of FY on or after 31st March 2023.
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