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Dematerialization Requirements For Private Companies in India

The document outlines the new dematerialization requirements for private companies in India, mandating that new securities be issued in dematerialized form and existing securities be converted accordingly. It details compliance obligations, including biannual Form PAS-6 submissions and adherence to the Depositories Act, while also highlighting the benefits and challenges of dematerialization. Best practices for implementation and key takeaways for companies are provided to facilitate a smooth transition.

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22 views12 pages

Dematerialization Requirements For Private Companies in India

The document outlines the new dematerialization requirements for private companies in India, mandating that new securities be issued in dematerialized form and existing securities be converted accordingly. It details compliance obligations, including biannual Form PAS-6 submissions and adherence to the Depositories Act, while also highlighting the benefits and challenges of dematerialization. Best practices for implementation and key takeaways for companies are provided to facilitate a smooth transition.

Uploaded by

litoleh127
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Dematerialization

Requirements for Private


Companies in India
Welcome to this comprehensive presentation on the recent notification
extending dematerialization requirements to private companies in India.
We'll explore the key provisions, compliance requirements, and practical
steps for implementation. This information is crucial for company
secretaries, chartered accountants, and legal professionals working with
private companies.
Key Provisions of the
Notification
Issuance in Compliance with
Dematerialized Form Depositories Act
Private companies, except The process must adhere to
small and government the provisions of the
companies, must issue new Depositories Act, 1996, and
securities only in associated regulations.
dematerialized form and
facilitate dematerialization of
existing securities.

Form PAS-6 Submission


Companies must file Form PAS-6 with the Registrar of Companies
within 60 days from the conclusion of each half-year, certified by a
practicing company secretary or chartered accountant.
Depositories in India
National Securities Depository Limited (NSDL) Central Depository Services (India) Limited
(CDSL)
Established in 1996, NSDL was the first electronic securities
depository in India. It has played a crucial role in Founded in 1999, CDSL is the second depository in India. It
transforming the Indian securities market by eliminating provides efficient and secure depository services to all
paper-based certificates and enabling electronic trading. market participants, including investors, stockbrokers, and
listed companies.
Documents Required for ISIN Application (Part 1)

Corporate Documents Board Authorization Financial Documents


Certified true copies of Board Resolution specifying Certified true copy of the last
Memorandum & Articles of authorized signatories audited annual report
Association List of authorized signatories with Net Worth Certificate as per
Certificate of Incorporation specimen signatures specified format
Documents Required for ISIN Application (Part 2)

RTA Documentation Company Undertaking Tripartite Agreement


Confirmation letter from the Registrar Undertaking from the company in the Agreement between the issuer
and Transfer Agent (RTA) in the specified format, affirming compliance company, RTA, and the selected
specified format. with all requirements. depository (NSDL/CDSL). Three copies
with franking required.
Depository-Specific
Requirements
NSDL Specific Forms CDSL Specific Forms
NSDL may require additional CDSL might ask for forms like
forms such as the Issuer the Issuer Admission Form,
Application Form, Agreement Tripartite Agreement, and
for Admission of Securities, Board Resolution for admission
and Declaration for Admission of securities.
of Securities.

Documentation Process
Companies must maintain all agreements and forms as part of the
documentation process, ensuring easy accessibility for future
reference and audits.
Summary of Responsibilities

1 Facilitate Dematerialization
Ensure all existing securities are converted to
dematerialized form and new issues are only in demat
format.

2 Biannual Form Filing


File Form PAS-6 with the Registrar of Companies every six
months, duly certified by professionals.

3 Regulatory Compliance
Adhere to the Depositories Act and related SEBI guidelines
throughout the process.

4 Documentation Maintenance
Keep all agreements, forms, and related documents
properly filed and easily accessible.
Fees Payable to NSDL/CDSL
Paid Up Capital Upto 2.5 cr 2.5 to 5 cr 5 cr to 10 cr 10 cr to 20 cr Above 20 cr

Joining fees 15000 15000 15000 15000 15000


(One-time)

Annual Custody 1667 3000 7500 15000 25000


Fees Upto
March 2025
(Pro-rata Basis)

Gross Value 16667 18000 22500 30000 40000

GST @18% 3000 3240 4050 5400 7200

Security Deposit 10000 18000 45000 90000 150000


for Non Small
Pvt company/
Public Ltd
company

Total Amount 29667 39240 71550 125400 197200


payable to
NSDL/ CDSL

Note: NSDL/CDSL Annual Fees from the next financial year onwards plus 18% GST will be applicable. Fees are subject to
change, and other expenses will be charged on actuals.
Benefits of Dematerialization

1 Increased Efficiency

2 Enhanced Security

3 Cost Reduction

4 Improved Transparency

5 Easier Compliance

Dematerialization offers numerous advantages for private companies, from streamlining operations to enhancing overall
corporate governance. It eliminates the risks associated with physical share certificates and facilitates smoother transactions.
Challenges in
Implementation
Initial Cost
1 Companies may face upfront expenses for setting up the
dematerialization process and paying depository fees.

Technical Adaptation
2 Implementing new systems and training staff to handle
electronic securities can be time-consuming.

Shareholder Education
3 Educating shareholders about the benefits and process of
dematerialization may require significant effort.

Regulatory Compliance
4 Ensuring continuous compliance with evolving regulations
can be challenging for some companies.
Best Practices for Smooth Transition
Early Planning
1
Start the process well before deadlines to avoid last-minute rushes.

Professional Assistance
2
Engage experienced company secretaries and legal experts for guidance.

Regular Communication
3
Keep shareholders informed about the process and its benefits.

Robust Documentation
4 Maintain detailed records of all steps taken during the
transition.
Key Takeaways and Next
Steps

1 Understand 2 Assess Current Status


Requirements Evaluate your company's
Familiarize yourself with all current position and the
aspects of the steps needed to comply
dematerialization with the new requirements.
notification and its
implications for your
company.

3 Plan Implementation 4 Seek Expert Guidance


Develop a comprehensive Consult with legal and
plan, including timeline, financial professionals to
budget, and resource ensure smooth compliance
allocation for the transition. and address any challenges.

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