Introducing: Dematerialisation of Shares for Indian Companies

Companies can now dematerialise their physical shares into electronically held securities through EquityList. Read more.

Equitylist Team

8 May, 2024

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Today, we are announcing our Dematerialisation product for Indian companies. Companies can now dematerialise their physical shares into electronically held securities through EquityList.

For the longest time, physical share certificates have been issued by unlisted companies to their shareholders as a record of ownership of company shares. However, physical share certificates are an outdated and tedious form of company ownership that is prone to extensive administrative overheads, delayed issuance of securities, and vulnerable to loss, theft and damage.

On the other hand, dematerialisation of securities is the process of converting physical share certificates into an electronic format. These electronic securities are then stored in a demat account, managed by a depository such as NSDL or CDSL in India. 

Electronic shares and streamlined issuance with EquityList

EquityList has partnered with preferred RTAs (Registrar and Transfer Agent) to streamline the entire dematerialisation process on top of our cap table software. With an updated cap table and a securities ledger on EquityList, companies can centralize prerequisite documents and easily coordinate with their shareholders throughout the process.

Our full-stack approach offers:

  • Advisory and documentation support throughout the process.
  • Coordination with shareholders through our Dematerialisation and Shareholder Dashboards to collect demat and tax residency details and track progress.
  • Partnership with RTAs to generate ISIN (International Securities Identification Number) for company shares. 
  • Assistance for shareholders in filling out the Dematerialisation Request Form.

Post dematerialisation of the current securities, companies can continue to issue new shares in their native electronic form in case of new fundraises and exercises of stock options. 

Ushering an era of electronic securities in India - Companies Act Rule 9B

Until recently, only public companies were required to dematerialise their shares, but in October of 2023, the Ministry of Corporate Affairs (MCA) amended the Companies (Prospectus and Allotment of Securities) Rules 2014 by adding Rule 9B - mandating dematerialisation for all private companies excluding small companies and government companies. This regulatory push comes with a strong intention of increasing securities regulations and transparency within the private markets.

Companies that have a paid-up capital of more than INR 4 crores and an annual turnover of more than INR 40 crores are mandated to dematerialise their physical shares by September 30, 2024. Learn more about Rule 9B and penalties for non-compliance in our blog here.

EquityList exists to serve customers by building products to manage company cap tables and shareholder equity. This extra upgrade now allows fast-growing Indian startups to go digital with their shareholding structures faster.

To learn more about our Dematerialisation product and book a demo, click here