Certain amendments have been made to the Companies (Prospectus and Allotment of Securities) Rules, 2014 ("PAS Rules"), vide notification G.S.R. 802 (E) dated October 27, 2023 ("PAS Amendment Rules"). The PAS Amendment Rules primarily mandates dematerialisation of securities of private companies and dematerialisation of share warrants issued by public companies prior to commencement of the Companies Act, 2013. Key highlights of the PAS Amendment Rules are as below: -


(a) Who?

A private company which is not a small company ("Relevant Private Company(ies)"). In this regard, the following timelines are to be borne in mind ("Reference Date") –

  1. March 31, 2023 ("Initial Reference Date"); or
  2. the last day of the subsequent financial year(s) after March 31, 2023 ("Future Reference Date").

A "small company" for the purposes of the PAS Amendment Rules means a company, other than a public company — (a) the paid-up share capital of which does not exceed INR 4,00,00,000 (Indian Rupees four crore) or such higher amount as may be prescribed and (b) the turnover of which as per profit and loss account for the immediately preceding financial year does not exceed INR 40,00,00,000 (Indian Rupees forty crore) or such higher amount as may be prescribed. Determination of "small company" is based on the audited financial statements for - (A) FY 2022-23 in case of (i) above; or (B) such subsequent financial year in case of (ii) above.

(b ) When?

A Relevant Private Company must comply with the PAS Amendment Rules prior to 18 (eighteen) months from the closure of the relevant financial year in which it ceases to be a small company ("Relevant Compliance Period). The Relevant Compliance Date therefore would be:

  1. September 30, 2024, if the Reference Date for such company is March 31, 2023 (i.e., 18 (eighteen) months from the Initial Reference Date); and
  2. such date which falls at the end of 18 (eighteen) months from the Future Reference Date, for all private companies that continue to be small companies as on date.


The PAS Amendment Rules seek to ensure dematerialisation of all the securities of a Relevant Private Company, and to this extent regulates both primary issuance as well as secondary transactions.

  1. Obligation is placed on every holder of securities ("Securities Holder") of a Relevant Private Company to dematerialise his / her / its existing securities, if he / she / it intends to, on or after the Relevant Compliance Date1 -
    1. transfer his/her/its securities; and
    2. subscribe to any securities of the Relevant Private Company (whether by way of private placement, or bonus issue or rights issue).
  2. Obligation is placed on every Relevant Private Company to:
    1. ensure that entire holding of securities of its promoters, directors, key managerial personnel has been dematerialised, before making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer after the Relevant Compliance Date;
    2. issue the securities only in dematerialised form within the Relevant Compliance Period; and
    3. facilitate dematerialisation of all its securities within the Relevant Compliance Period.
    It is clear that the transition path of 18 (eighteen) months from the date on which such companies become obligated to comply with Rule 9B (i.e., 18 (eighteen) months from the Reference Date) is available for existing shares of the promoters/directors/KMPs of the Relevant Private Companies or to the Securities Holders2 in relation to their existing securities3. We believe the PAS Amendment Rules intend to require Relevant Private Companies to gradually transition from physical shares to dematerialised shares in relation to the issued shares. However, all new securities should only be issued in dematerialized form starting from October 27, 2023, although the PAS Amendment Rules are ambiguous in this regard to a degree.


  1. Government companies are excluded from dematerialisation requirements except in the limited context of share warrants of a public government company.
  2. A public government company must -
    1. inform the registrar of companies under Form PAS – 7, about details of share warrants issued by such company; and
    2. must dematerialise such existing share warrants within a period of 6 (six) months from the commencement of the PAS Amendment Rules.
    In the event of non-action on the part of holder of such share warrants, the company is obligated to dematerialise these warrants and transfer the same to Investor Education and Protection Fund.

The PAS Amendment Rules are part of Government of India's endeavours to strengthen anti-corruption / anti-money laundering controls and improve transparency. It is certainly a welcome move to help manage shareholders / shareholding especially for private companies with fragmented capitalisation table. However, as on date the PAS Amendment Rules do not clarify whether it also applies to a Security Holder who is not looking to transfer his / her / its securities or subscribe to new securities on or after the Relevant Compliance Date. The PAS Amendment Rules also do not clarify whether it is also appliable in case of issuance of new securities by a Relevant Company after the date of the notification, i.e., October 27, 2023. We believe there will be more clarity on these aspects in the coming days.


1. If a private company is not a small company as of March 31, 2023, any transfer by Security Holders post September 30, 2024, can only be undertaken after its securities have been dematerialized.

2. Even when such companies are looking to issue shares within the 18-month window.

3. Even when such security holders are looking to issue subscribe to new securities/transfer their securities within the 18-month window.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.