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India – Extended Deadline for Dematerialization Compliance
The Indian government has extended the deadline for private limited companies to dematerialize their securities, providing additional time for a smooth transition to the new framework.
Background
On the 27th of October 2023, India’s Ministry of Corporate Affairs introduced the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023.
With exception of small companies, all private limited companies incorporated in India are required to dematerialize their shares.
Compliance Requirements
- All private limited companies (excluding small companies) must dematerialize their shares by the 30th of June 2025.
- Shareholders and debenture holders are also required to dematerialize their holdings.
- After the 30th of June 2025, all issues and transfers of shares and debentures must be in dematerialized form only.
Next Steps for Companies
1. Review your company’s current securities status.
2. Plan for the dematerialization process well ahead of the June 2025 deadline.
3. Inform and assist shareholders and debenture holders in dematerializing their holdings.
The Risks of Non-Compliance
Companies failing to meet the dematerialization mandate face severe consequences:
1. Operational Restrictions:
- Companies cannot issue or allot any type of securities.
- Security holders cannot transfer or subscribe to any securities.
2. Financial Penalties:
- For Companies: INR 10,000 + INR 1,000 per day of continued violation (Maximum: INR 200,000)
- For Defaulting Officers: INR 10,000 + INR 1,000 per day of continued violation (Maximum: INR 50,000)
For assistance with your dematerialization compliance, contact our expert team at mercator@citco.com.
Discover more about Navigating Entity Management in India.
