ROC Bengaluru Imposes Penalty for Approving Share Transfer in Physical Form
A significant compliance reminder for companies that are public companies or deemed public companies regarding mandatory dematerialisation of shares.
Case: In the matter of Stalwart Intellisense Private Limited
The Registrar of Companies (ROC), Bengaluru imposed penalties on the company and its directors for violating Rule 9A(3) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, which mandates that transfer of securities by a public company can be processed only when such securities are held in dematerialised form.
Key Facts of the Case
* Stalwart Intellisense Private Limited was a subsidiary of a public company, and therefore treated as a deemed public company under the Companies Act, 2013.
* On 28 March 2025, two shareholders – Mr. Christopher Arvinth (240 shares) and Mr. Anto Ajay Mendez (250 shares) – transferred their entire shareholding in physical form to Stalwart People Services India Limited.
* The company approved the transfer despite the shares not being dematerialised, which is contrary to Rule 9A(3).
Additional Compliance Lapse
* The company was incorporated on 21 July 2023 but failed to dematerialise its securities until 27 June 2025.
* This resulted in a non-compliance period of 707 days.
* The company eventually obtained its ISIN on 27 June 2025, after which dematerialisation became possible.
Penalty Imposed
* Company: ₹2,00,000
* Directors: ₹1,50,000 each
The penalty was imposed for approving transfer of shares in physical mode in violation of Rule 9A(3).
Compliance Takeaway
Public companies and deemed public companies (including subsidiaries of public companies) must ensure:
– Securities are dematerialised before approving any transfer
– Timely ISIN activation and demat connectivity
– Strict compliance with Rule 9A of PAS Rules, 2014
Failure to comply can attract significant monetary penalties on both the company and its officers in default.
The copy of the order is as under:
