Overview
Dematerialization of shares means converting physical share certificates into electronic form. In simple words, instead of holding paper share certificates, the shares are held in a Demat account in digital format. In India, dematerialization is regulated under the Companies Act, 2013 and the rules framed by the Ministry of Corporate Affairs along with depository regulations.
As per Rule 9A of the Companies Prospectus and Allotment of Securities Rules, every unlisted public company is required to issue securities only in dematerialised form and facilitate dematerialization of its existing securities. Shareholders of such companies must convert their physical shares into Demat form before transferring or subscribing to new shares. The company is required to obtain ISIN for its securities and enter into agreement with depositories and Registrar and Transfer Agent if applicable.
Dematerialization increases transparency and reduces risks associated with physical certificates such as loss, theft, forgery or damage. It also simplifies share transfers, pledging of shares and corporate actions like bonus issue, rights issue or private placement. Maintaining proper demat compliance is important to avoid penalties and restrictions on corporate actions.
The process involves coordination with depositories, preparation of corporate documents and ensuring proper reconciliation of share capital. BizGlobal assists companies in obtaining ISIN, coordinating with depository participants, preparing necessary board resolutions, filing required forms and ensuring smooth dematerialization of shares in compliance with legal provisions.
