# Securities in Dematerialised Form (Section 29)

## Why this section exists

Physical share certificates are vulnerable to loss, theft, forgery and slow settlement. Section 29 pushes companies toward holding and transferring securities in electronic (demat) form via depositories (NSDL / CDSL) under the Depositories Act, 1996.

## Core rule — Two buckets

Company Type	Demat Requirement
Every company making a public offer & other prescribed classes	Mandatory — issue securities only in dematerialised form
Any other company	Optional — may convert to demat OR issue in physical form

## Special rules for Promoters of Public Companies making a Public Offer

Promoters may hold convertible securities only in dematerialised form.
Entire physical holding up to the date of IPO must be converted to demat before the offer.
After the IPO, promoter holding is permanently in demat only.

## Rule 9A — Unlisted Public Companies (Important — heavily tested)

### 1. Scope

Applies to every unlisted public company except:

Nidhi companies
Government companies
Wholly owned subsidiaries

Such companies must:

Issue securities only in demat form, AND
Facilitate dematerialisation of all existing securities.

### 2. Pre-corporate-action check

Before making any offer of securities / buyback / bonus issue / rights offer, the company must ensure that the entire holdings of promoters, directors, and KMPs are already dematerialised.

### 3. Obligations of every security holder (from 02-Oct-2018)

Situation	Obligation
Wants to transfer securities	Must demat the securities before transfer
Wants to subscribe to securities (private placement / bonus / rights)	Must ensure all existing securities are in demat before subscription

### 4. Application to depository

The company must apply to a depository, get ISIN for each type of security, and inform existing holders.

### 5. Ongoing obligations

Timely payment of admission + annual fees to depository, RTA.
Maintain security deposit of not less than 2 years' fees with depository/RTA.
Comply with SEBI / Depository circulars on demat of unlisted public companies.

### 6. Default consequence

If the company defaults on payments to depository/RTA, it cannot:

Offer any securities;
Buyback;
Issue bonus / rights shares.

### 7. Filing — Form PAS-6

File Form PAS-6 with Registrar within 60 days from end of each half year, certified by a CS or CA in practice.

### 8. Reconciliation

Report any difference between issued capital and capital held in demat form to depositories immediately.

### 9. Grievance redressal

Complaints of security holders → Investor Education and Protection Fund (IEPF) Authority.

### 10. IEPF action threshold

IEPF can act against depository / participant / RTA only after prior consultation with SEBI.

## Memory Aid

"P-D-K in demat B-B-R" — Promoter, Director, KMP must be in demat before any Buyback / Bonus / Rights / fresh issue.

Worked example

### Example 1

Example 1 — Unlisted public company doing a rights issue

XYZ Ltd. is an unlisted public company (not Nidhi/Govt/WOS). It proposes a rights issue. The promoter holds 5,000 shares in physical form.

Treatment: Before launching the rights issue, XYZ must ensure the promoter's 5,000 shares are dematerialised, otherwise the rights issue cannot proceed under Rule 9A(2).

### Example 2

Example 2 — PAS-6 deadline

ABC (unlisted public) closes its half-year on 30th September 2026. The Form PAS-6 must be filed with the Registrar by 29th November 2026 (within 60 days from end of half-year), certified by a CS or CA in practice.

### Example 3

Example 3 — IPO promoter compliance

M Ltd. files DRHP for an IPO. The promoter holds 40% in physical certificates. Before the IPO opens, the entire 40% must be converted to demat. Post-listing, the promoter cannot hold even a single share in physical form.

⚠️ Common exam mistakes

Applying Rule 9A to Nidhi, Government, or wholly-owned subsidiary companies — they are expressly excluded.
Confusing the 60-day PAS-6 filing window with a quarterly filing — it is half-yearly.
Believing physical holding is permissible for promoters post-IPO; once converted, it must stay in demat.
Treating IEPF action against a depository as unilateral — IEPF must first consult SEBI.
Forgetting that defaulting unlisted public companies are barred from buyback, bonus, and rights issues until payments are cleared.

Bare-Act text Section 29 read with Rule 9A · Companies Act, 2013; Companies (Prospectus and Allotment of Securities) Rules, 2014, Rule 9A · click to expand

Section 29: Public Offer of Securities to be in Dematerialised Form. (1) Notwithstanding anything contained in any other provisions of this Act,— (a) every company making public offer; and (b) such other class or classes of public companies as may be prescribed, shall issue the securities only in dematerialised form by complying with the provisions of the Depositories Act, 1996 and the regulations made thereunder. (2) Any company, other than a company mentioned in sub-section (1), may convert its securities into dematerialised form or issue its securities in physical form in accordance with the provisions of this Act or in dematerialised form in accordance with the provisions of the Depositories Act, 1996 and the regulations made thereunder.

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →

Public Offer of Securities to be in Dematerialised Form (Section 29) and Rule 9A for Unlisted Public Companies

Worked example

⚠️ Common exam mistakes