The Centre on Tuesday asked unlisted public companies to issue shares in the Demat form from next month. It said the transfer of shares will also have to be undertaken in electronic form.
Demat Account or dematerialised account allows holding shares and securities in electronic format. During online trading, shares are bought and held in a Demat account to facilitate easy and transparent trade
The move is expected to increase transparency and prevent 'benami' shareholdings and back-dated issuance of shares, the Corporate Affairs Ministry said.
According to the Companies Act, 2013, “a public company is a company which is not a private company and has a minimum paid up capital of Rs 5 lakh and have the right to transfer of shares of a company”. The minimum number of members needed to form a public company is seven and there is no bar on the maximum number.
The ministry said elimination of risks associated with physical certificates such as loss, theft, mutilation and fraud, would be a key benefit from the decision on having shares in Demat form.
"Unlisted public companies are expected to facilitate the dematerialisation of their securities in coordination with depositories and share transfer agents," the ministry said in a statement.
Grievances would be handled by the Investor Education and Protection Fund (IEPF) Authority, it said.