MCA Grants 5-Year Extension for Producer Companies on Share Dematerialisation Compliance

In a major relief for producer companies, the Ministry of Corporate Affairs (MCA) has extended the compliance deadline for mandatory dematerialisation of existing shares. Originally set for September 30, 2024, the deadline has now been pushed to March 2028, giving these companies an additional five years to meet the requirement.

The dematerialisation mandate, announced in October last year, requires private companies (except small companies) to convert their physical shares into electronic form by September 2024. They are also required to issue new securities exclusively in dematerialised form.

Producer companies, which are corporate entities created for farmers and agricultural producers, were particularly impacted by this mandate. These companies provide critical support in areas such as access to credit and post-harvest management, and their shares are owned only by 'Primary Producers' or 'Producer Institutions,' making them unique compared to other private entities.

Experts welcome the MCA's decision to extend the compliance window, viewing it as a business-friendly and forward-looking reform. One expert noted that this move reflects the government's understanding of the challenges faced by the agricultural sector, providing much-needed flexibility for producer companies to strengthen governance and transparency without the pressure of immediate regulatory deadlines.

Another expert pointed out that many members of producer companies are small farmers and rural producers who struggle with financial literacy and access to technology, making the dematerialisation process difficult. The extension allows these companies to modernise gradually while focusing on their core mission of member welfare and rural development.

By granting additional time, the government aims to strike a balance between maintaining regulatory standards and supporting producer companies' transition to a digital economy. This move is expected to empower these entities, ensuring long-term sustainability and growth in the agricultural sector.