"Public offer = Pure Demat. Unlisted prescribed = Holding/Transfer in Demat. Others = Choice."
Worked example
### Example 1
Example 1: ABC Ltd is launching an IPO. Can it issue physical share certificates?
Answer: No. Section 29(1) mandates that companies making a public offer issue securities ONLY in dematerialised form. Physical certificates are prohibited for public offers.
### Example 2
Example 2: XYZ Ltd, a small private company, wants to issue shares to its 5 family member shareholders. Can it issue physical certificates?
Answer: Yes, generally. Under Section 29(2), 'other companies' (not making public offer, not in prescribed unlisted category) may issue securities in physical form. However, if XYZ falls within prescribed unlisted companies (per Sec 29(1A)), it must use demat.
### Example 3
Example 3: A prescribed unlisted public company wants to transfer shares from one shareholder to another. Can the transfer be done physically?
Answer: No. Per Sec 29(1A), for prescribed unlisted companies, securities can be held or transferred ONLY in demat form.
⚠️ Common exam mistakes
Thinking demat is mandatory for ALL companies — for 'other companies' it remains a choice.
Confusing Sec 29(1) (public offer) with Sec 29(1A) (prescribed unlisted companies) — they cover different categories.
Forgetting that compliance is with the DEPOSITORIES Act, 1996 — not just the Companies Act.
Missing that even held/transferred securities (not just issued) must be in demat for prescribed unlisted companies.
Bare-Act text Section 29 · Companies Act, 2013 · click to expand
29. (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. (1A) In case of such class or classes of unlisted companies as may be prescribed, the securities shall be held or transferred only in dematerialised form in the manner laid down in 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.