Compulsory Dematerialisation of Shares

The Ministry of Corporate Affairs (MCA) issued the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023 on October 27, 2023. These rules mandate all private companies, except small companies and government companies, to dematerialize their shares by 30 September 2024.

This amendment aims to enhance transparency, reduce fraud, mitigate the risk of loss and theft, and streamline the share transfer process, thereby reducing expenses related to printing and distributing physical certificates for companies. It also assists regulators in combating benami transactions, money laundering, and similar illicit activities.

We are pleased to present this article to provide a better understanding of the implications of the notification.