Mandatory Dematerialisation: Deadline Extended for Producer Companies

In a major reprieve for producer companies, the Ministry of Corporate Affairs (MCA) has notified an amendment to the Companies (Prospectus and Allotment of Securities) Rules, 2014, allowing them time until March 31, 2028, to dematerialise their securities.

Considering that a special legislation has not been enacted for producer companies, Part IX A of the erstwhile Companies Act, 1956, continues to apply to them.[1] Producer companies are those body corporates carrying out activities as specified under the Act, including marketing of produce of farmers, etc.

Last year, the MCA mandated that all private companies, excluding small companies, facilitate the dematerialisation of existing securities and issue new securities solely in dematerialised form (click here to read our article on the mandate). This requirement was established through the introduction of Rule 9B, which private companies must comply with by the end of this month, according to Sub-rule (2) of the same Rule.

The present amendment carves out an exception for producer companies, adding a proviso to said Sub-rule granting them an extended deadline. As a result, producer companies now have until March 31, 2028, to meet the compliance requirements.

[1] First proviso to Section 465(1) of the Companies Act, 2013.