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Can a Public Limited Company hold physical shares?

1. Yes, But with Limitations

  • A Public Limited Company can hold physical shares of other companies, especially unlisted or private companies whose shares are not dematerialized.
  • However, for listed companies, shares must be held in dematerialized form, as per SEBI regulations.
  • The holding of physical shares is not prohibited, but it is discouraged and heavily regulated, especially for transfers.

2. SEBI Regulations on Physical Shareholding

  • As per SEBI notification dated April 1, 2019, transfer of listed shares in physical form is not allowed (except in cases of transmission or transposition).
  • Listed Public Limited Companies must dematerialize their shareholdings to execute any transfer or sale.
  • Shareholders of listed entities must convert physical shares to DEMAT before selling or transferring them.

3. Holding Physical Shares in Unlisted Companies

  • Public companies may hold physical share certificates of unlisted companies, as these companies may not be linked with depositories.
  • Such holdings are valid but must be properly recorded and safeguarded, and reflected in the company’s register of investments.
  • If the unlisted company opts for dematerialization, the holding public company must initiate conversion to DEMAT.

4. Accounting and Record-Keeping Obligations

  • Physical shares held must be recorded as non-current investments in the company’s books of accounts.
  • Details such as certificate number, folio number, number of shares, and face value must be maintained.
  • The company must ensure that title documents are secure and accessible for audit and inspection.

5. Preference for Dematerialization

  • For ease of transfer, risk reduction, and regulatory compliance, companies are strongly encouraged to dematerialize physical shares.
  • Demat shares allow better control, faster transactions, and clear ownership tracking.
  • SEBI and MCA continue to push toward full digitization of securities in both listed and unlisted public companies.

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