➞ The digitization of physical shares is mandatory for all foreign shareholders of Indian companies 

 

DEADLINE: Am June 30, 2025 (originally September 30, 2024)  

 

Introduction 

Do you need a short-term increase in equity for your Indian subsidiary? As a European company, do you want to change your ownership structure in your Indian entity? Or do you want to part ways with your Managing Director, who has shares in your Pvt. Ltd.? Without converting your physical shares into electronic form, this will no longer be possible from autumn 2025.

The Indian Ministry of Corporate Affairs (MCA) has taken the next step towards digitalization:   

  • Share certificates must be digitized, i.e. all subsidiaries of foreign shareholders must want to print their individual convert physical shares into an electronic format – Keyword: “Dematerialization of Shares”  
  • Additional Share capital may in future only be issued in this electronic form, capital increases are only possible in this form, as are the transfer of shares. 
  • Due Date for compliance with this new regulation, the 30.06.2025.   

We we recommend that you to address the issue promptlySince we have already carried out the Demat procedure for numerous companies and have gained relevant experience, we forecast a period of 3-4 months.  

 

What does the Demat procedure mean for you as a European parent company? 

  1. Your Pvt. Ltd. must have received an International Securities Identification Number (ISIN) by then.  
  1. Their shareholders must each open so-called Demat accounts with a registered depository participant (DP) of OTCEI (Over-The-Counter Exchange of India). DPs can be so-called DDP banks (Designated Depository Participants) or RTAs (Registrar and Transfer Agents).  
  1. The non-compliance or delay it is up to the respective company to It is prohibited to transfer existing shares or to issue new shares, and capital increases are also not possibleFurther sanctions may follow.  

Since the implementation deadline has already been extended from September 2024 to June 2025, a further extension is rather unlikely.  

 

Advantages of the "Dematerialisation of Shares" 

In addition to the usual risks that always exist with digitalization (e.g. cybersecurity), the switch to electronic corporate documents brings numerous advantages, including:  

  • Better transparency in the issuance and allocation of securities by private companies  
  • Faster and smoother transactions by eliminating the cumbersome process of transferring physical documents  
  • Increased security against theft, loss or forgery of physical documents 
  • Cost savings as printing, processing and storage of documents as well as dependence on intermediaries and courier services are eliminated   
  • Increased liquidity as the lengthy process of share transfer is significantly accelerated through seamless electronic transfer  
  • Optimized overview of investments as investors can access their portfolio details, transaction history or dividend records online.  

 

Do you know where your relevant securities actually are? Did you even receive these documents when you founded your Pvt. Ltd.? Do you perhaps even need to apply for duplicate copies of these documents in India? 

Feel free to contact us without obligation. We will navigate you through India's complex administrative regulations.