Section 29 of Companies Act, 2013 – Why Physical Share Certificates Are No Longer Welcome
There was a time when share certificates were pieces of paper locked inside cupboards. Lost certificates. Duplicate issues. Endless paperwork.
That world is mostly gone now.
With increasing focus on transparency and digital records, the Companies Act brought in Section 29 of the Companies Act, 2013 to change how securities are issued and held in India. The idea was simple—move away from paper and bring everything into a clean, electronic system.
And Section 29 does exactly that.
What Section 29 Actually Says (In Practical Terms)
At its core, Section 29 addresses the requirements for public offers of securities and how those securities should exist. Not physically. Electronically.
The law clearly mandates that companies making a public offer and certain prescribed unlisted public companies must issue and hold their securities only in dematerialized (electronic) form, complying with the Depositories Act, 1996, making physical share certificates obsolete for them.
No physical certificates. No exceptions for convenience. If the company falls under this category, demat is the only route.
Public Offer of Securities to Be in Dematerialised Form
One rule under Section 29 leaves very little room for interpretation:
Public offer of securities to be in dematerialised form.
That’s it. Straightforward.
Any company going for an IPO or public issue must issue shares electronically. Investors receive securities in their demat accounts maintained with depositories like NSDL or CDSL. Physical allotment simply doesn’t happen anymore.
This rule protects both sides. Companies don’t have to manage paper trails. Investors don’t worry about loss, forgery, or delays.
Applicability to Unlisted Public Companies Too
Section 29 doesn’t stop at listed companies or IPOs. Certain prescribed unlisted public companies are also covered.
Why? Because risk doesn’t disappear just because a company isn’t listed. Shareholding disputes, transfers, and compliance issues still exist. By forcing dematerialisation here as well, the law ensures consistency and accountability.
Once covered, these companies also cannot issue physical shares, even internally.
Why Dematerialisation Actually Makes Sense
Dematerialised securities are not just about compliance. They genuinely make life easier.
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Ownership records are clean and accurate
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Transfers happen faster
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No risk of damaged or forged certificates
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Reporting becomes simpler
For investors, it’s convenience. For companies, it’s operational sanity. And from a legal standpoint, it aligns everything neatly with the Companies Act and the Depositories framework.
Link With the Depositories Act, 1996
Section 29 doesn’t operate in isolation. It directly ties companies to the Depositories Act, 1996.
That means:
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Securities must be issued through registered depositories
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Holdings must be maintained electronically
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Transfers and changes must flow through the depository system
This integration is intentional. It creates one central, verifiable system instead of scattered records.
What Happens If a Company Ignores Section 29?
Ignoring Section 29 is not a small lapse. Issuing physical share certificates where dematerialisation is mandatory can attract regulatory action.
Authorities like SEBI and the Ministry of Corporate Affairs take this seriously. Apart from penalties, the bigger damage is to credibility. Once investor trust is shaken, recovery takes time.
Real-Life Situations Where Section 29 Applies
Think of a company planning an IPO. All shares offered must be issued in electronic form. No physical certificates, even temporarily.
Or take a prescribed unlisted public company raising capital. Section 29 still applies. Shares must go directly into demat accounts. Any deviation becomes a compliance violation.
These are not rare situations. They happen every day.
Key Takeaways
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Section 29 addresses the requirements for public offers of securities
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It mandates that companies making a public offer and certain prescribed unlisted public companies must issue and hold their securities only in dematerialized (electronic) form, complying with the Depositories Act, 1996, making physical share certificates obsolete for them
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Public offer of securities to be in dematerialised form is mandatory
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Physical share certificates are not permitted for covered companies
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The provision operates under the Companies Act framework
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Non-compliance can lead to penalties and loss of trust
If you’re planning a public issue, capital raise, or need help ensuring compliance under Section 29, professional guidance can save you future trouble.
You can explore expert support at Callmyca.com to keep your securities structure fully compliant and stress-free.
