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KoreanExtension of Deadline for Dematerialisation of Securities
The Ministry of Corporate Affairs (MCA), through its notification dated 27 October 2023, amended the Companies (Prospectus and Allotment of Securities) Rules, 2014 (Rules) by introducing Regulation 9B, which mandated all private companies, except small companies, and government companies, to dematerialise their securities by 30 September 2024 (please click here to read our coverage on the same). However, through a subsequent amendment via notification dated 12 February 2025, the MCA has extended the deadline for private companies to comply with the dematerialisation requirement to 30 June 2025. In view of the same, companies will have up to 30 June 2025, to dematerialise their securities, without incurring any penalties for non-compliance.
In parallel, the Securities and Exchange Board of India (SEBI) has also updated its regulatory framework concerning Alternative Investment Funds (AIFs) on 14 February 2025. Effective 1 July 2025, all new investments made by AIFs—whether through primary infusion or through a secondary transfer—must be held in dematerialised form. However, any investments made prior to 1 July 2025 are exempt from this requirement. Additionally, the dematerialisation requirement also does not apply to a scheme of an AIF whose tenure ends before 31 October 2025, or such schemes of an AIF which are already under extended tenure as on 14 February 2025. While the general requirement to hold investments in dematerialised form applies from 1 July 2025, AIFs must take note of the following exceptions in relation to existing investments, that:
- if an investee company is legally mandated under applicable law to facilitate dematerialisation (as for private companies under the Companies Act, 2013, as stated above), or
- if an AIF (alone or jointly with other SEBI-registered entities) exercises control over the investee company, as defined under Regulation 2(1) (f) of the AIF Regulations, 2012.
Then the dematerialisation of existing securities held by AIFs must be completed by 31 October 2025 (which date shall be 30 June 2025 in case of existing investments in securities of a private company), aligning with the extended timeline set by MCA for private companies, ensuring a structured and phased transition.
The regulatory changes by both MCA and SEBI ensure alignment of compliances as well as the timelines for completing the compliance requirements.
The information contained in this document is not legal advice or legal opinion. The contents recorded in the said document are for informational purposes only and should not be used for commercial purposes. Acuity Law LLP disclaims all liability to any person for any loss or damage caused by errors or omissions, whether arising from negligence, accident, or any other cause.
