Dematerialisation is the conversion of physical share certificates into electronic form held with a depository (NSDL or CDSL) through a depository participant. The Companies Act, 2013 and the SEBI regulations have progressively made dematerialisation mandatory for specified classes of companies and transactions.
The Mandatory Requirement
A private company that is not a small company, and every public company, must dematerialise its securities. The compliance date for non-small private companies was extended to 30 September 2026. A small company, a government company, a Nidhi, a producer company and an OPC are exempt from the mandatory demat requirement, subject to the conditions. A company that is required to dematerialise but has not done so is exposed to penalty and to restrictions on transfers.
The Process
The company appoints a Registrar and Transfer Agent (RTA), obtains the International Securities Identification Number (ISIN) from the depository, and enters into a tripartite agreement with the depository and the RTA. The shareholders open demat accounts with a depository participant and submit a dematerialisation request in Form DRF, surrendering the physical certificates. The RTA verifies the request, and the depository credits the shares to the demat account.
The Transfer and Transmission
Once the shares are dematerialised, the transfer is effected through the depository’s electronic system, and the company’s register of members is updated based on the depository’s records. The transmission of demat shares follows the depository’s nomination and transmission procedures. The physical transfer route under Section 56 is displaced for demat shares.
The Practical Discipline
The company should maintain the ISIN, the tripartite agreement, the RTA records and the demat reconciliation. The 30 September 2026 deadline should be tracked, and the physical certificates should be converted before the deadline. A company that misses the deadline faces a compliance gap and a transfer restriction.
Call to Action: We advise companies on dematerialisation compliance, ISIN and RTA coordination. For a demat-readiness review, contact office@anujdesaiassociates.com, Ph No. 9619456656, Website https://anujdesaiassociates.com, LinkedIn linkedin.com/in/ca-anuj-desai-122547230.