Unlisted cos may soon be asked to keep shares in demat form

The government has initiated work for putting in place a system wherein unlisted companies will be required to keep their shares in dematerialised form, a senior official said amid continuing efforts to clamp down on illicit financial transactions.

The plan, once in force, would act as a safeguard against illegal dealings involving unlisted companies and help ensure increased transparency.

The corporate affairs ministry, which is implementing the Companies Act, is working on the contours of the plan whereby unlisted firms have to keep their shares in dematerialised (demat) or electronic form.

A senior ministry official told PTI that it is "work in progress" and the required mechanism as well as other issues are being worked out.

Having shares in demat form is also expected to help in curbing benami transactions.

Currently, only listed companies are required to have their shares in demat form.

There were more than 11.76 lakh registered companies that were active at the end of April this year, as per official data. Out of them, little over 11.68 lakh companies were limited by shares.

As part of cracking down on black money flows and illicit assets, the corporate affairs ministry has struck off the names of around 2.26 lakh companies that have not been carrying out business activities for long. Many of these companies are suspected to have been used for illegal fund flows.