MCA has issued a Notification dated 27th October, 2023 Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023 by which non-small private limited companies have to dematerialize their existing securities and ensure that all further issuances and transfers are in Demat form only.

In accordance with the said rules i.e. Rule 9 of the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023, Non-Small Private Limited Companies need to dematerialize their existing securities and ensure that further issue of securities and transfers are only in dematerialized form.

The MCA has provided a timeline of 18 months for private companies to comply with the mandatory dematerialization requirement. This means that all private companies (other than small companies) will need to dematerialize their shares by September 30, 2024.

1.    Applicability of Rule 9 of the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023:

1.   Applicable on Public Limited Companies w.e.f.02nd October, 2018

2.   Applicable to Non-Small Private Limited Companies w.e.f. 30th September 2024.

2.   Non-Applicability of Rule 9 of the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023:

The provision of Demat of Securities shall not be applicable on the following Companies:

1.   Nidhi Company

2.   Government Company

3.   Wholly Owned Subsidiary Company of Public Company

4.   Small Private Limited Companies

Meaning of “Small Company”

“small company” means a company, other than a public company,

i.        paid-up share capital of which does not exceed Four Crore rupees or such higher amount as may be prescribed and

ii.        turnover of which as per profit and loss account for the immediately preceding financial year does not exceed Forty crore rupees or such higher amount as may be prescribed.

It means if any one of the above criteria fulfilled i.e. either paid up capital exceed 4 Cr. Or Turn Over Exceeds 40 Cr, then dematerialization provisions are applicable to the non-small private limited companies. And such company has to dematerialize their existing securities on or before 30th September 2024 and comply all the provisions related to dematerialization of securities.

Provided that nothing in this clause shall apply to—

  • Public company
  • Section 8 company
  • Holding or subsidiary company
  • Producer company
  • a company or body corporate governed by any special Act;


1. Appoint a Registrar and Transfer Agent (RTA)

  • Selection of RTA: Appoint an RTA who will handle the dematerialization process.
  • Agreement: Enter into an agreement with the RTA to manage the securities dematerialization and related services.

2. Enter into Agreements with Depositories

  • NSDL and CDSL Agreements: The company must enter into agreements with both National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).
  • Tripartite Agreement: Enter into a tripartite agreement between the company, the depository (NSDL/CDSL), and the RTA.

3. Obtain International Securities Identification Number (ISIN)

  • Apply for ISIN: The company, through its RTA, must apply to the depositories to obtain an ISIN for each type of security issued.
  • Allocation of ISIN: Once approved, an ISIN will be allocated to each type of security.

4. Board Resolution

  • Pass Resolution: The Board of Directors must pass a resolution approving the dematerialization of securities and authorizing officials to sign the agreements and other necessary documents.
  • Record in Minutes: Ensure the resolution is recorded in the minutes of the Board meeting.

5. Inform Shareholders

  • Communication: Inform shareholders about the option to dematerialize their securities.
  • Guidelines: Provide guidelines on how shareholders can convert their physical shares into electronic form.

6. Update Articles of Association (if required)

  • Amend Articles: If necessary, amend the Articles of Association to include provisions related to dematerialization.
  • Shareholder Approval: Obtain approval from shareholders for the amendments, if required.

7. Issue Public Notice

  • Public Notice: Issue a public notice regarding the dematerialization of securities, if required by regulatory authorities or internal company policy.

8. Facilitate Shareholder Requests

  • DRF Submission: Ensure the RTA provides Dematerialization Request Forms (DRF) to shareholders.
  • Process Requests: The RTA will process the dematerialization requests received from shareholders and update the records accordingly.

9. Maintain Electronic Records

  • Update Records: Ensure the company’s records are updated to reflect the dematerialized securities.
  • Continuous Monitoring: Continuously monitor and reconcile the electronic records with the depository participants.

10. Comply with Regulatory Requirements

  • SEBI Regulations: Ensure compliance with Securities and Exchange Board of India (SEBI) regulations related to dematerialization.
  • Periodic Filings: Submit periodic filings and reports as required by SEBI and the stock exchanges.

11. Provide Assistance to Shareholders

  • Customer Support: Set up a helpdesk or customer support service to assist shareholders with the dematerialization process.
  • Information Dissemination: Regularly disseminate information and updates regarding the dematerialization process to shareholders.

By following these steps, a company can ensure compliance with the necessary regulations and facilitate the dematerialization of its securities smoothly.


  • Certified True Copy of Board Resolution for dematerialization of securities alongwith the list of authorized signatories and request letter for dematerialisation;
  • Application for admission as Issuer of Eligible Securities as per the formatprovided by the DP;
  • Details of shares to be converted into demat form;
  • Net Worth Certificate issued by a Chartered Accountant;
  • Certified true copies of the Memorandum of Association and Articles ofAssociation along with the Certificate of Incorporation of the Company;
  • Certified true copy of audited annual report for the last financial year;
  • GST Certificate
  • Undertaking by the Applicable Company in the prescribed format.
  • Any other additional document as may be required by the DP
  • If Applicable Company has issued equity shares after latest balance sheet in thatcase, such company shall provide certified true copy of PAS-3.
  • If there is any variation in the face value of shares or reduction in the capital afterthe last balance sheet date in that case, the Applicable Company shall provide acertified true copy of form SH-7;


1. Open a Demat Account

  • Choose a Depository Participant (DP): Select a DP registered with either National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL).
  • Submit Required Documents: Fill out the account opening form and submit the necessary documents such as PAN card, Aadhaar card, passport-sized photographs, and a canceled cheque.

2. Fill Out a Dematerialization Request Form (DRF)

  • Obtain DRF: Collect the DRF from your DP.
  • Complete the Form: Fill out the DRF with the required details, including your DP ID, client ID, and the details of the securities to be dematerialized.

3. Submit Physical Share Certificates

  • Attach Share Certificates: Attach the original physical share certificates along with the DRF.
  • Cross Out “Surrendered for Dematerialization”: Write “Surrendered for Dematerialization” on each share certificate.

4. Submit DRF and Share Certificates to DP

  • Submit Documents: Submit the duly filled DRF and the physical share certificates to your DP.
  • Acknowledgement: The DP will provide an acknowledgement slip as proof of submission.

5. Verification by DP

  • Verification Process: The DP verifies the DRF and the share certificates for accuracy and completeness.
  • Forward to Registrar: After verification, the DP sends the DRF and share certificates to the company’s Registrar and Transfer Agent (RTA) for further processing.

6. Verification by RTA

  • Check Details: The RTA verifies the details mentioned in the DRF and checks the authenticity of the share certificates.
  • Update Records: Upon successful verification, the RTA updates the records in the company’s register.

7. Credit of Dematerialized Shares

  • Confirmation to DP: The RTA confirms the dematerialization of the shares to the DP.
  • Credit to Demat Account: The DP then credits the dematerialized shares to the investor’s Demat account.

8. Confirmation to Investor

  • Transaction Statement: The DP provides a transaction statement to the investor, showing the credited shares in the Demat account.

Important Points to Note

  • ISIN Number: Each security has a unique International Securities Identification Number (ISIN) which is required for the dematerialization process.
  • Charges: DPs may charge a fee for the dematerialization process. These charges vary from one DP to another.
  • Time Frame: The entire process typically takes about 15-30 days from the date of submission of the DRF and share certificates to the DP.

By following these steps, you can successfully convert your physical share certificates into electronic form, making it easier to trade and manage your securities.


  • Know Your Customer (“KYC”) details;
  • Original Share Certificates;
  • Other documents as per the specific requirement of the selected DP.


First Step:

after allocation of ISIN, every Non-Small Private Limited Company governed by this rule is obligated to submit Form PAS-6 to the Registrar of Companies within sixty days from the conclusion of each half-year, and it should be duly certified by either a company secretary in practice or a chartered accountant in practice.

Further compliances on Non-Small Private Limited Company after allocation of ISIN:

A.   Make timely payment of Fees (admission as well as annual).

B.  Maintenance of Security deposit of 2 year’s Fees, as per agreement executed with the Depository, Registrar to an issue, Share Transfer Agent etc.

C.  Comply with the regulations, guidelines or circulars, if any issued by the Securities and Exchange Board or Depository from time to time.

• Reduced risk of loss, theft, or damage to physical shares.
• Easier and faster transfer of shares.
• Reduced transaction costs.
• Increased transparency and efficiency in the corporate sector.
• Improved corporate governance.

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