Compulsory demat move withdrawn for now

The ministry of corporate affairs has dropped plans to notify a new rule to compel all companies raising funds from the public to convert their share certificates and bonds in the electronic (demat) format.

The decision to withdraw the draft Dematerialisation of Certificates Rules, 2011, was taken after it was found a similar proposal had been already included in the Companies Bill, 2011, expected to be cleared by the Cabinet soon.

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It will give a breather to small firms who had expressed reservations against the government move.

The proposal, issued on June 6, had wanted all companies mopping up resources from public and their subsidiaries convert share certificates and bonds into an electronic (demat) form. The Companies (Dematerialisation of Certificates) Rules, 2011, was proposed to come into force from October 1.

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All new issuances were also to be in demat form. The rules were meant to cover all companies which had raised money by issue of shares and debentures, by accepting public deposits, stock, bonds or any other financial instruments from the public.