In a move that has brought significant relief to private companies across India, the Ministry of Corporate Affairs (MCA) has, albeit belatedly, extended the deadline for mandatory dematerialisation (demat) of securities to 30 June 2025.
This was done as it was felt that the initial deadline of 30 September was not feasible given the sheer volume of nearly 1.7 million active private companies in India. The move is thus a welcome reprieve from the previous deadline.
The extension gazette notification, however, is silent on the filings that may have been penalised previously for being late, prior to the release of this notification.
The original mandate of October 2023 was aimed to bolster corporate governance by requiring all private companies, excluding small and producer companies, to dematerialise their securities. This regulation stipulated that promoters, directors and key managerial personnel must convert their entire holdings into demat form before companies could issue new securities or conduct buybacks.
However, the surge in demat applications overwhelmed depositories like National Securities Depository Limited and Central Depository Securities Limited, prompting the MCA to reconsider the timeline.
The extension provides crucial breathing room for companies to comply with the new regulations. Failure to do so could result in severe penalties including financial fines, restrictions on share issuance and capital restructuring, and a loss of investor confidence.
The initiative is expected to eliminate physical certificates, boost transparency, expedite transactions and improve investor access, ultimately fostering a more efficient and secure financial ecosystem for India’s private companies.
