The MCA has, by way of a notification dated September 10, 2018, incorporated Rule 9A to the Companies (Prospectus and Allotment of Securities) Rules, 2014 (‘Prospectus Rules’), which sets out conditions required to be adhered to by unlisted public companies with respect to securities issued by them. Some of the key conditions are set out below.

i.  Securities are required to be issued only in dematerialized form and the company should facilitate dematerialization of all its existing securities;

ii.  Securities held by promoters, directors and key managerial personnel of unlisted public companies have to be dematerialized prior to making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer;

iii.  Any securities proposed to be transferred on or after October 2, 2018, will be required to be converted into dematerialized form prior to the transfer; and with respect to any subscription on or after October 2, 2018, the securities will be allotted to the subscriber in dematerialized form; and

iv.  A company will not be permitted to offer any new securities, buyback existing securities, or issue bonus or right shares, till such time that it is in non compliance with the regulations, directions etc. in relation to dematerialization of shares.