Government on 10th September, 2018 notified Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2018 which will be applicable from 02nd October, 2018.
Rule 9A: Issue of securities in dematerialized form by unlisted public companies
Every unlisted public company shall –
1. Is this provision applicable to Deemed Public Company i.e Private Companies being subsidiary of Public Company?
Yes. All the provisions of public company are applicable to Deemed Public Company also.
2. Whether any shareholder still can retain physical shares?
Yes. If any members wish to remain shares in physical form, he can retain it. But at the time of transfer of shares, he/she needs to convert it in demat form before transfer.
3. Is ISIN compulsory for company if all the shareholders want to keep shares in physical form?
Yes. Rules cast responsibility on companies to facilitate dematerialization. So, taking ISIN before 02nd October, 2018 is must.
4. What if all the members and directors have physical shares and want to issue new shares/bonus shares/buyback of shares?
Company has to first convert entire holding of Promoters, Directors and KMPs in demat form before issue of new shares or buy back of shares.
5. From 02nd October, 2018, Can public company issue shares in physical form if members want physical shares?
No. As per wording of rules, from 2nd October, 2018, Companies must have to issue Securities in demat mode.