All deals in unlisted companies from October 2 to be in demat form

New Delhi, Sep 11 (IANS) As part of its drive against benami entities, the government on Tuesday said all deals in securities of unlisted public companies will have to be in dematerialized form from October 2.

"The Ministry of Corporate Affairs (MCA) has notified that with effect from October 2, 2018, issue of further shares and transfer of all shares by unlisted public companies shall be in dematerialized form only," the MCA said in a statement.

The rules related to this have been amended accordingly, it said.

"The MCA has taken this step as a measure for further enhancing transparency, investor protection and governance in the corporate sector," the MCA added.

The government's move follows the June 8 directive of market regulator Securities and Exchange Board of India (Sebi) that tightened the norms for listed companies.

The Sebi notification mandated that all transfer of securities in listed companies after December 5, 2018, will be permitted only in dematerialized form.

Listing down the major benefits of dematerialization of securities now available to unlisted public companies, the MCA said it will eliminate the risks associated with physical certificates such as loss, theft, mutilation, and fraud.

Further, the Ministry said the decision will improve "corporate governance system by increasing transparency and preventing malpractices such as benami shareholding and back-dated issuance of shares".

It will also help facilitate transfer and pledging of securities, apart from exemption from payment of stamp duty on transfer, the statement read.

"Unlisted public companies are expected to facilitate dematerialization of their securities in coordination with depositories and share transfer agents," it said.

Any grievances arising out of dematerialization of securities will be handled by the Investor Education and Protection Fund (IEPF) Authority, clarified the Ministry.