Demat of shares of private limited company

Given your facts (private company, foreign nationals as shareholders, turnover > ₹40 crore), you should handle as follows:

1. Obtain ISIN for company’s securities

   • Company needs to procure an International Securities Identification Number (ISIN) for its shares via the depository (NSDL/CDSL) and comply with demat formalities. HLS-SJM Advisors India Private Limited+1

2. Open demat accounts for all existing shareholders (including foreign nationals)

   • For foreign shareholders: verify whether they are NRIs, foreign nationals resident abroad, etc. They likely need to open NRI demat accounts (via DP) or appropriate depository account.

   • They must have PAN (or obtain PAN) to open the account.

   • Transfer existing physical share certificates into dematerialised form via the DP.

3. Company to facilitate dematerialisation

   • The company (or its Registrar & Transfer Agent) must coordinate with DPs, collect demat details of all shareholders, and get physical certificates converted.

   • Update register of members (if still maintained) or rely on depository benefits.

   • Future issues / transfers of shares must be only in demat form.

4. Handle foreign shareholder issues properly

   • For foreign nationals, check whether they are resident or non-resident for Indian regulatory purposes; check applicable FEMA / FDI regulations (though this is separate from demat requirement).

   • Ensure the demat account type, bank account and KYC are consistent with FDI norms (if any).

   • Ensure the company’s share transfer policy/Articles permit transfers to such overseas entities.

5. Ensure deadlines are met

   • Make sure the dematerialisation is completed within the required timeline (18 months from FY end on or after 31 March 2023). Delay may restrict the company’s ability to issue new securities or transfer them.

A foreign shareholder does not necessarily need an Indian PAN merely to hold shares in demat form. The company must first confirm that it is covered by Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014, including the applicable definition of a “small company” and any relevant exemption. A covered private company must issue securities only in dematerialised form and facilitate dematerialisation of existing securities; the requirement does not, by itself, make every shareholder open an Indian demat account immediately.

For a non-resident holding shares, the usual route is to open an NRI/foreign-investor demat account with a SEBI-registered depository participant, subject to the applicable FEMA route and investment category. The DP will specify its KYC documents; PAN is commonly requested, but the position and alternatives can depend on the investor’s status, account type and intermediary. Coordinate with the company’s RTA/DP and the shareholders’ chosen DP before submitting demat requests, and check FEMA reporting/compliance separately where relevant.

Dematerialisation involves coordinating the company’s records, RTA and investor KYC, so it helps to map the covered securities and shareholder account requirements early. Manual follow-ups and document tracking can be difficult; automation reduces repetitive work while professional judgment remains in control. At Jir AI, our 2,000+ AI agents and 650+ integrations streamline GST, ITR, TDS, TCS and other compliance workflows, helping reduce manual workload by up to 70%. For a practical walkthrough, connect with us on WhatsApp: https://wa.me/message/3HVOZ7HIY4ESC1