All companies (except small companies) have to convert their shares from physical certificates to dematerialized (demat) form by June 30, 2025.

KEY CONSEQUENCES OF NON-COMPLIANCE

1. Share Transfer Restrictions

Physical shares will become completely non-transferable, effectively freezing any movement or trading of these assets.

2. Securities Issuance Limitations

Companies unable to complete dematerialization will face restrictions on issuing new securities, severely impacting capital raising capabilities.

3. Capital Access Barriers

Financial institutions increasingly avoid physical shares as collateral, making it difficult for non-compliant companies to leverage their equity for funding.

STRATEGIC CONSIDERATIONS FOR EFFICIENT DEMATERIALIZATION

1. Act Immediately

Due to the high volume of dematerialization requests as the deadline approaches, significant processing delays are occurring. The actual dematerialization often takes substantially longer than the timeframes initially provided by depository participants.

2. Review Corporate Documentation

Ensure your Articles of Association explicitly permit the issuance and maintenance of shares in dematerialized form. Update these documents if necessary before proceeding.

3. Select an Established Depository Participant

Partner with reputable depositories like NSDL or CDSL to ensure reliable, secure, and efficient dematerialization services with proper regulatory compliance.

4. Establish Comprehensive Shareholder KYC

Collect and verify complete identification documentation from all shareholders, including

• PAN card details
• Aadhaar information
• Current residential address
• Active bank account details
• Contact information

5. Implement Digital Record Management

Create secure digital archives of all historical share records, registers, and certificates to maintain accessibility during and after the transition process.

STEPS INVOLVED IN DEMATERIALIZATION OF SHARES

1. Appoint a Registrar and Transfer Agent (RTA)
   • RTAs act as intermediaries to process demat requests.
   • They provide the necessary documents that are to be executed to facilitate the demateralisation of shares.
2. Facilitate Bulk Demat
   • Coordinate with DPs and shareholders to facilitate bulk demat of physical shares still in circulation.
3. Processing by RTA/Company
   • The RTA verifies the authenticity of the certificates and processes the demat request.
4. Credit to Demat Account
   • Upon validation, the shares are credited to the shareholder’s demat account, and the physical certificate is destroyed.

CALL TO ACTION

Whether you represent a company or are an individual shareholder holding physical certificates, initiating the dematerialization process immediately is critical to avoid compliance issues, potential financial losses, and operational disruptions after the June 30, 2025 deadline.