The Union Ministry of Corporate Affairs has announced new rules under the Companies Act, 2013, impacting the issuance of share warrants and dematerialisation of securities for both public and private companies.
Public companies that issued share warrants before the Companies Act came into force and have not converted them into shares now face stringent deadlines and requirements. They must report details of these share warrants to the registrar using form PAS-7 within three months of the new rules being implemented.
Within six months, these companies must request the holders of these warrants to surrender them and convert them into shares. Notifications must be made on company websites and in newspapers. Failure by warrant holders to surrender warrants within the specified time will prompt the company to convert these warrants into shares and transfer them to the Investor Education and Protection Fund.
The new rules mandate private companies, excluding small ones, to issue and facilitate securities exclusively in dematerialised (electronic) form in accordance with the Depositories Act, 1996, and its regulations.
Large private companies must comply within 18 months after the end of their financial year if they have not yet adhered to these dematerialisation rules.
Any offer or issuance of securities made by these companies after the compliance deadline necessitates prior dematerialisation of all securities held by promoters, directors and key managerial personnel.
Individuals holding securities in these private companies must ensure their securities are in dematerialised form before transferring them or subscribing to new securities.
It is important to note that these rules do not apply to government companies.
