Can A Private Ltd Or Closely Held Company Issue Shares In Demat Form?

We all know that shares of listed companies, are traded in the demat or the electronic form. Of course, shares of listed companies can also be held in the physical format.

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We all know that shares of listed companies, are traded in the demat or the electronic form.

Of course, shares of listed companies can also be held in the physical format, but, in that case you cannot sell them through the recognized stock exchanges in the country.

Can A Private Ltd Or Closely Held Company Issue Shares In Demat Form?
You can buy and sell shares of listed companies through your own private dealings, if you hold them in the physical format. Of course, these days to do that is a headache, because you will have to hunt for share transfer stamps. Shares of private or closely held companies can also be held in the demat form.

Fees for unlisted companies to issue shares in demat form

As you are aware that we have two depositories, who hold shares for all the companies in the demat form. One is the NSE led NSDL and the other is the BSE led CDSL.

The NSDL at the moment charges Rs 30,000, apart from the service tax that is currently prevailing to get shares of closely held companies listed. Now, if the private ltd company or the closely held company gets its shares listed on any recognised stock exchanges in the country, within one year of joining NSDL, the joining fee paid by the Issuer will get adjusted against annual custody fee or one time custody fees, as the case may be.

What are the documents that a private ltd company or any other unlisted company needs?

As is the case always, there are a host of documents that are needed. Among these include:

1) If the company is a private ltd company, there is a need for the undertaking from that particular company.

2) Audited balance sheet of the concerned company, along with certified true copies.

3) The memorandum an articles of association of the company. Here again one would need the certified true copies of the same.

4) A networth certificate from a Chartered Accountant.

5) Now, companies can register with the CDSL or the NSDL. In case, one has registered with the CDSL and wants to also do it with NSDL, the ISIN activation letter from CDSL has to be submitted.

6) List of Authorised signatory with Board Resolution with specimen signatures. 

Read: What is the difference between CDSL and NSDL

Why private ltd companies should also hold shares in the demat form?

It is better for private ltd companies to also hold shares in the demat form, as worries over theft, stamp duty and arranging of share transfer stamps, worn out certificates and the usual headaches of transferring shares is eliminated.

Also, these days, shares of private ltd companies change hand frequently, given the emergence of venture capitalist and high networth individuals buying stakes in these companies.

The process of applying at NSDL or CSDL is not too difficult, as long as your documents are in order.

Read:What are the advantages of holding shares in the demat form?

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Read more about: demat
Story first published: Wednesday, October 19, 2016, 9:02 [IST]
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