Ministry of Corporate Affairs (“MCA”) has notified the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2025 (“Rules, 2025) which has amended the Companies (Prospectus and Allotment of Securities) Rules, 2014 (“2014 Rules”). This has come into effect on 12th February 2025.
Currently, a private company that is not a small company as on the last day of a financial year ending on or after 31st March 2023 must comply with the rule 9B* of 2014 Rules which mandates dematerialization of securities within 18 months from the closure of such financial year. However, a producer company falling under this sub-rule has up to 5 years to comply.
Now, the newly inserted proviso allows a private company, other than a producer company, which is not a small company as on 31st March 2023, may comply with the Rule by 30th June 2025.
* 9B. Issue of securities in dematerialised form by private companies:-
(1) Every private company, other than a small company, shall within the period referred to in sub-rule (2) –
(a) issue the securities only in dematerialised form; and
(b) facilitate dematerialisation of all its securities,
in accordance with provisions of the Depositories Act, 1996 (22 of 1996) and regulations made thereunder.
(2) A private company, which as on last day of a financial year, ending on or after 31st March, 2023, is not a small company as per audited financial statements for such financial year, shall, within eighteen months of closure of such financial year, comply with the provisions of this rule.
Provided that a producer company covered under this sub-rule shall, within a period of five years of closure of such financial year, comply with the provision of this sub-rule.
(3) Every private company referred to in sub-rule (2) making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer, after the date when it is required to comply with this rule, shall ensure that before making such offer, entire holding of securities of its promoters, directors, key managerial personnel has been dematerialised in accordance with the provisions of the Depositories Act, 1996 (22 of 1996) and regulations made thereunder.
(4) Every holder of securities of the private company referred to in sub-rule (2),-
(a) who intends to transfer such securities on or after the date when the company is required to comply with this rule, shall get such securities dematerialised before the transfer; or
(b) who subscribes to any securities of the concerned private company whether by way of private placement or bonus shares or rights offer on or after the date when the company is required to comply with this rule shall ensure that all his securities are held in dematerialised form before such subscription.
(5) The provisions of sub-rules (4) to (10) of rule 9A shall, mutatis mutandis, apply to the dematerialisation of securities under this rule.
(6) The provisions of this rule shall not apply in case of a Government company.
The Notification is linked below, for your ease of reference.
Source: Ministry of Corporate Affairs
