The Offer of securities in demat mode refers to the issuance or sale of securities in electronic or dematerialized form. Dematerialization involves converting physical certificates of securities into electronic form, which can then be held and traded electronically through a depository system.

Regulatory authorities in many countries, including India, have implemented measures to encourage or mandate the dematerialization of securities to modernize financial markets and improve investor protection. In India the Companies Act, 2013 and the Companies (Prospectus and Allotment of Securities) Rules, 2014  contain the provisions regarding public offer of securities in demat form.


  • Section 29 of the Companies Act, 2013- offer to be in demat mode only w.e.f 15th August 2019


  • Public companies making public offer of securities
  • Prior to the offer mandatory demat of all shares of each promoters

Warrants w.e.f 28th October 2023

  • Any existing issued warrants to be notified to Registrar in PAS 7
  • Within 6 months the warrants to be converted into shares in demat mode and intimation to warrant holders to be made by placing notice on website and newspaper advertisement in English and vernacular language in form PAS 8.
  • If warrant holders fail to do the same, company shall demat those warrant into shares and transfer to Investors Education and Protection Fund (IEPF).
  • Rule 9A- Issue of securities in dematerialised formby unlisted public companies.
  • Issue of securities can be made only in demat mode
  • Before the issue the entire holding of securities of promoters, directors and KMPs should be dematerialized form.
  • International Security Identification Number (ISIN) to be generated for each class of shares.
  • Every holder of securities of an unlisted company who intends to transfer/subscribe to any securities of the company on or after 2nd October, 2018 shall ensure that all his existing securities are held in dematerialized form.
  • Company shall comply with the requirements to the depository, registrar to an issue and share transfer agent.
  • Every unlisted public company shall submit Form PAS-6 with the Registrar of Companies within 60 days from the conclusion of each half year duly certified by a CS/CA in practice.
  • Not applicable to an unlisted public company which is a Nidhi, a Government company or a wholly owned subsidiary.


  • *Rule 9B- Issue of securities in dematerialised form by private companies w.e.f from 28th October 2023
  • Every private company which as on 31st March 2023 is other than small company** shall by 30th September 2024 ensure that company has obtained the ISIN Number and facilitated the demat of its shares.
  • No fresh shares whether by way of rights or private placement, buyback or bonus can be done after 30th September 2024 unless the shares of all promoters/directors/KMP are in demat form.
  • No shares can be issued or transferred in physical form after 30th September 2024.
  • This rule shall not apply in case of a Government company.

**Small company are the company having paid up capital less than Rs. 4 Crore and a turnover less than Rs. 40 Crore in previous FY. This criterion is not applicable to any Holding or Subsidiary company, not for profit Company, or any Body corporate governed by any Special Act.


The above amendments are applicable to ‘securities’ i.e., shares (equity / preference), debentures and other securities.

In today’s era of digital economy, physical share certificate pose inconvenience and risk of loss which is mitigated by converting the share certificates to demat mode. Digital record of shares also enhances transparency and accountability by preventing fraud. Thus, this amendment is a welcome move, however the compliance cost for private companies who are family owned with two shareholders would increase manifold with joining fees and annual maintenance fees of Depository and Registrar and Transfer Agent. Further to comply with this new requirement, demat account needs to be opened for overseas shareholders of Indian companies who are facing practical challenges to complete the KYC process with Depository Participants which includes applying for a Permanent Account Number (PAN).

Akansha Rathi and Associates (ARACS), Company Secretary Firm in Navi Mumbai is engaged into dematerialisation of shares related process. We have a team of experts who not only possess required skills and experience but also have worked in complex business environment and were engaged in providing complex solutions in terms of providing related Compliance services to our clients.

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