INTRODUCTION The era of keeping physical share certificates for over seven decades is now a thing of the past. With the amendment brought by The Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023 under the Ministry of Corporate Affairs (MCA), it is mandatory for all private companies (excluding small company) to move to dematerialised shares. What was initially enforced by SEBI in 2019 requiring listed companies to move to demat has now made its way to every private company in Kurnool, Hyderabad and elsewhere in India. This article looks at the silent revolution. BACKGROUND/HISTORY Section 29 of the Companies Act, 2013, provides the legal framework. Initially, Section 29(1) provided that all companies offering to the public shall issue securities in demat form. However, with the amendment made by the Companies (Amendment) Act, 2019, Section 29(1A) was added empowering the Central Government to make it mandatory to move to demat for a particular group of unlisted companies. The timeline is as follows: 2018: MCA made it mandatory for all Unlisted Public Companies to move to demat under Rule 9A 2019: SEBI banned physical transfers of shares for listed companies1. 2023: Rule 9B was inserted by Notification G.S.R. 701(E) on 27 th October 2023 which made it mandatory for Private Companies. This was done after observing major misuse of physical shares in shell companies by the SFIO and ED. The shares were transferred with backdated signatures, forged signatures and benami holders2. Small companies have been excluded. A small company, under section 2(85) means a company having a paid up share capital of not more than Rs. 4 Crore and a turnover not exceeding Rs. 40 crore. INCIDENT Under the newly added Rule 9B the following shall happen: All private companies which are not small as on 31 st March 2023 shall ensure that they facilitate dematerialisation of all their securities by 30th September 2024. ISIN (International Securities Identification Number) must be obtained from Depositories (NSDL/CDSL). This can be done by engaging a SEBI registered RTA and entering into a tripartite agreement3. After 30th September 2024, these companies will not be able to issue new shares, bonus or right shares. They will also not be allowed to transfer, transmit or buy-back shares in physical form. If the shares have not been dematted, SH-4 (Transfer of shares) e-form will be rejected by the ROC. Shareholders must open a demat account and file a DRF (Dematerialisation Request Form), along with the original share certificates. In practice, many companies are not adhering to the new requirements. Adjudication notices are being issued by ROCs in Andhra Pradesh and Telangana. The penalty under section 450 of the Companies Act is Rs. 10,000/- for the company and officers and Rs. 1000/- per day of default. ROCs are also rejecting Form PAS-3 (allocation of shares) if the company has not adhered to the changes. In the case of Quantico Technologies Pvt. Ltd. Vs. Registrar of Companies, Delhi [NCLT, 2025], the NCLT decided that failure to dematerialise is a continuous contravention and the Directors cannot rely on the Defence of Ignorance4. OPINION (Judges, Professionals & Scholars) The move has been appreciated by legal professionals however there are concerns. 1. MCA: The government has stated this move will remove issues of theft, mutilation and forgery of share certificates and improve corporate governance and KYC procedures under PMLA. 2. JUDICIAL: NCLT benches have consistently ruled that demat is not just a procedural requirement but substantive requirement to identify real beneficial owners. In multiple orders relating to Section 90 (SBO)5, the NCLAT have stated that physical shareholding is the greatest obstacle to piercing the corporate veil. 3. PROFESSIONAL: The Institute of Company Secretaries of India (ICSI) have noted that whilst listed companies have compliance teams, private companies in tier 2 cities (such as Kurnool) do not have much awareness. RTAs charge between Rs. 15,000-30,000 to create an ISIN which many small private companies find difficult. Many scholars argue that the exclusion of small companies has created a loophole and many shell companies intentionally keep the capital below Rs. 4 crore. 4. ACADEMIC: Prof Umakanth Varottil (NUS) argues that we are following global best practice. Both the UK (Companies Act 2006) and Singapore have moved away from physical shareholding. It is vital to implement T+0 settlement and track foreign investments under FEMA. However, some argue that the MCA should have implemented an amnesty scheme to enable companies to condone the situation. Many old companies setup in the 1980s have untraceable shareholders who have passed away and the legal heirs cannot be traced6. CONCLUSION The move to demat has not only been a technological update but also a philosophical update to company law. Since the decision in Salomon v. Salomon recognised the company as a separate legal entity, we now ask who is the natural person behind the company? Mandatory demat, along with the SBO Rules and BRSR Core disclosures will create a trinity of transparency. This is a practical aspect for law students at Sri Prasuna Law College. Students would need to draft resolutions and tripartite agreements. The paper share certificate will become a relic of the past. One judge at NCLT commented "Paper certificates are easy to hide. Demat are impossible to hide7." An obvious question would be, will the MCA enforce demat for small companies and OPCs in the near future8? FOOTNOTES [1] Under Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014, inserted vide G.S.R. 853(E). [2] Violating Section 89 and Section 90 of the Companies Act, 2013 regarding beneficial ownership [3] Mandated under Section 11 of the Depositories Act, 1996. [4] Interpreting Section 470 read with Section 450 of the Companies Act, 2013. [5] Referencing principles under Section 90 of the Companies Act, 2013 concerning Significant Beneficial Owners (SBO). [6] Posing compliance and succession challenges under Section 56 read with Section 108 of the erstwhile Companies Act, 1956 / Companies Act, 2013. [7] Salomon v. Salomon & Co. Ltd. [(1897) AC 22]; corporate personality doctrine. [8] Under the discretionary powers granted by Section 29(1A) of the Companies Act, 2013