Section 29 of the Companies Act, 2013: Public Offer and Dematerialisation of Securities
Section 29 requires securities covered by the provision to be issued, held or transferred in dematerialised form in accordance with the Depositories Act, 1996 and the applicable regulations. The provision now extends beyond companies making a public offer and works with prescribed dematerialisation rules for specified unlisted companies.
Updated: 16 September 2026
Meaning and scope of Section 29
In simple terms, dematerialisation means holding securities electronically through the depository system instead of relying on physical security certificates. Section 29 links the Companies Act framework with the Depositories Act, 1996 and the regulations governing depositories and dematerialised securities.
Under Section 29(1), every company making a public offer and every other prescribed class of company must issue its securities only in dematerialised form. Section 29(1A) further authorises the prescription of classes of unlisted companies whose securities must be held or transferred only in dematerialised form.
Important: The word "public" in clause (b) of Section 29(1) was omitted with effect from 15 August 2019. Sub-section (1A) was also inserted with effect from that date. The current provision therefore permits dematerialisation requirements to be prescribed for classes of companies beyond companies making a public offer.
Section 29 - Public offer of securities to be in dematerialised form
Sub-section (1): Notwithstanding anything contained in any other provision of the Companies Act, 2013:
- every company making a public offer; and
- such other class or classes of companies as may be prescribed,
shall issue securities only in dematerialised form by complying with the Depositories Act, 1996 and the regulations made under it.
Sub-section (1A): In the case of prescribed classes of unlisted companies, securities must be held or transferred only in dematerialised form in the manner laid down under the Depositories Act, 1996 and the regulations made under it.
Sub-section (2): A company not covered by sub-section (1) may convert its securities into dematerialised form. Subject to the Companies Act and the prescribed dematerialisation requirements, securities may otherwise be issued in the form permitted by law.
Dematerialisation under Rule 9A and Rule 9B
The Companies (Prospectus and Allotment of Securities) Rules, 2014 contain important rules made under Section 29. These rules should be read with the Act, later amendments, applicable exemptions and MCA notifications.
| Provision | Broad application | Key effect |
|---|---|---|
| Rule 9A | Unlisted public companies, subject to the exclusions stated in the Rules | Requires prescribed securities to be issued in dematerialised form and facilitates dematerialisation of existing securities, together with related compliance requirements. |
| Rule 9B | Private companies covered by the rule, subject to stated exclusions and the applicable compliance timeline | Introduces dematerialisation requirements for securities of prescribed private companies and regulates specified issues and transfers after the applicable compliance date. |
Rule 9B was inserted by the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023. Because applicability may depend on company status, financial thresholds, the relevant financial year, exemptions and later amendments, companies should verify the current rule text before undertaking an issue, transfer, buy-back, bonus issue, rights offer or other transaction involving securities.
Important legal terms
Dematerialised form
Dematerialised securities are securities held electronically in the depository system. The electronic record represents the investor's holding instead of a conventional physical certificate.
Depository
Under the Depositories Act, 1996, a depository is a company formed and registered under company law that has obtained the required certificate of registration under the Securities and Exchange Board of India Act, 1992.
Beneficial owner
A beneficial owner is a person whose name is recorded as such with a depository. The Depositories Act sets out the rights and obligations connected with depositories, participants, issuers and beneficial owners.
Public offer
For Companies Act purposes, the expression should be read with Section 23 and the other provisions governing public offers and private placements. Section 29 focuses specifically on the form in which securities covered by it must be issued, held or transferred.
Practical effect of Section 29
For a company covered by Section 29 and the prescribed rules, dematerialisation is not merely an investor convenience. It becomes a statutory compliance requirement. In practice, the company may need to arrange connectivity with a depository through the appropriate intermediaries, obtain the relevant security identification arrangements, facilitate dematerialisation of existing holdings, ensure that promoters, directors and key managerial personnel comply where the rules so require, and make the prescribed filings and reconciliations.
Before processing an issue or transfer, the company and its professional advisers should identify whether Section 29(1), Section 29(1A), Rule 9A, Rule 9B or another applicable securities-law requirement governs the transaction.
Legislative history relevant to Section 29
The Companies (Amendment) Act, 2019 widened the statutory framework. With effect from 15 August 2019, the word "public" was omitted from clause (b) of Section 29(1), and sub-section (1A) was inserted. These changes support the prescription of mandatory dematerialisation for specified classes of unlisted companies.
Official legal resources
For the latest statutory text and notifications, refer to the official Ministry of Corporate Affairs, the India Code database for central legislation, and the Securities and Exchange Board of India for applicable securities and depository regulations.
Related provisions: Readers may also refer to Section 23 - Public offer and private placement, Section 28 - Offer of sale of shares by certain members, and Section 30 - Advertisement of prospectus.
This article is a general legal information resource. Applicability of dematerialisation requirements depends on the current Act, Rules, notifications, exemptions and the facts of the company concerned.