All about Dematerialization of Securities.

What is an unlisted public company?

An unquoted public company, or unlisted public company, is a firm whose shares are not traded on recognized stock exchanges.

What are Section 8 companies? 

When a firm registers as a Non-Profit Organisation (NPO) to promote arts, commerce, education, charity, environmental protection, sports, science, research, social welfare, and religion, and it aims to utilize its revenues (if any) or other income to achieve these goals, the company is then recognized as a Section 8 company in India. 

What do you mean by the following companies? 

1. Nidhi Company 

A Nidhi Company is a non-banking financial institution (NBFC). It was created with the purpose of borrowing and making loans to its members. It instills a savings culture in its members and operates on the mutual benefit premise. These businesses are mostly found in the southern parts of the nation. Nidhi Company does not require a license from the Reserve Bank of India (RBI), making establishing it simple. It is a public business that should have "Nidhi Limited" as the suffix to its name.

2. Government company

Under section 2(45) of the Companies Act 2013, a Government Company is defined as “any company in which not less than 51% of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government Company”. 

3. Wholly owned subsidiary

A totally owned subsidiary is one in which a parent business owns all of the common shares. The parent firm can diversify, administer, and possibly minimize its risk by forming wholly owned subsidiaries. Furthermore, a wholly-owned subsidiary, unlike other subsidiaries, has no duties to minority shareholders. Wholly owned subsidiaries generally retain legal ownership over business activities, products, and processes. Speaking of the presentation of financial statements, the parent company's consolidated financial statement encompasses the financial results of its wholly-owned subsidiary. 

What is Rule 9A? 

The Government of India, in its ongoing effort to combat black money and Benami Transactions, has adopted a new rule, Rule 9A, in the Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2018.

Every unlisted public company was required by the new Rule 9A to issue additional securities in dematerialized form and to assist its stockholders in dematerializing their current holdings.

What does Rule 9A state?

1. Every unlisted public business must issue securities only in DEMAT form and make all of its existing securities dematerialized (obtain ISIN for each type of security).

2. Before making any offer to issue any securities by an unlisted public company, the promoters, directors, and KMP must have all of their securities in DEMAT form.

3. Before transferring or applying for subscription to any issuance of securities, every security owner of an unlisted public business must receive their securities in DEMAT form.

4. Submission of the share capital audit report reconciliation in Form PAS-6.

Can I change my public limited company to an unlisted limited company to avoid dematerialization?

What is form PAS-6?

It is the 'Reconciliation of Share Capital Audit Report' form. It must be reported to the Registrar of Corporations by unlisted public companies (ROC).  

What is the frequency of issuing PAS-6 forms? 

Six months.

What is the main objective of Form PAS-6? 

The main goal of Form PAS-6 is to record the details and alterations in a company's share capital every six months. 

Who is officially authorized to fill Form PAS-6? 

A professionally practicing Company Secretary (CS) or Chartered Accountant must certify it (CA).

Whether demat connectivity from both NSDL and CDSL is required?

No, a firm may obtain DEMAT connectivity from any depository; however, all of its shareholders must have a DEMAT account; otherwise, a shareholder's shares cannot be dematerialized.

What are the companies exempted from dematerialization for unlisted public companies? 

1. Nidhi Companies 

2. Government Company 

3. Wholly owned subsidiary companies

What is an ISIN number?

1. ISIN is an acronym for International Securities Identification Number.

2. It is a 12-digit alphanumeric security identification number (e.g. INE002A01018). 

3. Different ISINs will be assigned to fully paid-up equities, partially paid-up equity, and stock with unequal voting/dividend rights provided by the same issuer.