Dematerialisation of Shares & its Exemption

MCA mandated the Dematerialization of shares for all Unlisted Public Companies through its notification dated 10^th September, 2018, in which Rule 9A of Companies (Prospectus and Allotment of Securities) Rules, 2014 was introduced.

Link to notification dated 10^th September 2018:-  Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2018

According to the said rule every Unlisted Public Company was required to dematerialize its shares on or before 02^nd October, 2018 as well as, transfer of physical shares was also restricted after the said date.

1. Shareholders who wish to transfer their shares have to dematerialize their shares first.

Earlier the notification was applicable to every Unlisted Public Company without any exemption given to any class of such company. But keeping in view, requirement of the stakeholders MCA has issued notification on 22^nd January, 2019 in which following classes of unlisted Public Companies are being exempted to Dematerialize their shares:

i. Nidhi Company

ii. Government Company

iii. Wholly Owned Subsidiary (WOS)

Below is the Text of notification:

In the Companies (Prospectus and Allotment of Securities) Rules, 2014, in rule 9A, after sub-rule (10), the following shall be inserted, namely:-

 “(11) This rule shall not apply to an unlisted public company which is:-

 (a) a Nidhi

(b) a Government company or

(c) a wholly owned subsidiary.”

Link of notification dated 22^nd January, 2019:-

 Companies (Acceptance of Deposits) Amendment Rules, 2019

 Whether the notification would have retrospective effect?

The notification is made effective from the date of publication in Official Gazette i.e. 22^nd January, 2019 but there is no such clarification that the notification will be made effective retrospectively. We can wait for any such clarification from MCA.

{The author is a Company Secretary in Practice & can be reached at (M) 9811888288 (E) mail@ csdeepikashukla.com}