MCA Extends Producer Companies’ Compliance on Share Dematerialization by Five Years

The Ministry of Corporate Affairs (MCA) has extended the compliance deadline for the mandatory dematerialization of existing shares, which is a significant relief for producer companies. The deadline, which was originally scheduled for September 30, 2024, has been moved to March 2028, providing these businesses an extra five years to fulfill the requirements.

The dematerialisation mandate, introduced in October of last year, directs private companies (except small businesses) to convert their physical shares to electronic form by September 2024. They are also required to issue new securities only in dematerialised form.

This requirement had a particularly strong impact on producer companies, which are corporate entities established for farmers and agricultural producers. These companies provide vital support in areas such as finance access and post-harvest management, and their shares are owned solely by ‘Primary Producers’ or ‘Producer Institutions,’ making them unique among private entities.

Experts applaud the MCA‘s decision to extend the compliance window, describing it as a business-friendly and forward-looking measure. According to one expert, this approach indicates the government’s understanding of the agriculture sector’s issues, giving producer companies much-needed freedom to increase governance and transparency without being pressured by urgent regulatory deadlines.

Another expert noted that many members of producer companies are small farmers and rural producers who lack financial literacy and access to technology, complicating the dematerialization process. The extension enables these organizations to gradually upgrade while remaining focused on their fundamental objective of member welfare and rural development.

By allowing additional time, the government hopes to strike a balance between preserving regulatory standards and assisting producer companies in their transition to a digital market. This action is designed to empower these bodies while assuring the agricultural sector’s long-term viability and expansion.