The Corporate Affairs Ministry of India has made it compulsory for the unlisted public companies to issue and transfer their shares in demat or electronic form from October 2. The step has been taken to increase transparency, investors protection and governance in the corporate sector.
According to the ministry, issuing or transferring the shares in demat form will reduce the risk of loss, theft, mutilation and fraud, associated with the physical certificates. Furthermore, there will be an improvement in the corporate governance system that will not only bring the much needed transparency but also eliminate the wrongdoings such as benami shareholding and back dated issuance of shares.
"Unlisted public companies are expected to facilitate the dematerialisation of their securities in coordination with depositories and share transfer agents," the Corporate Affairs Ministry said in a press release.
Issuing of shares in an electronic form would mean that there will be no requirement to pay stamp duty on transfer and there would a considerable ease in transferring and pledging of the securities.
If there are any grievances with regard to the dematerialisation of securities, then it would be taken care by the Investor and Protection Fund (IEPF) Authority.