NSDL Introduces Enhanced Controls on Transfer and Creation of Charge Over Shares of Private Companies

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Sep 30, 2025

NSDL Introduces Enhanced Controls on Transfer and Creation of Charge Over Shares of Private Companies

National Securities Depository Limited (‘NSDL’) has introduced significant amendments to its Bye Laws (‘Bye Laws’) and the NSDL Business Rules, 1996 (‘Business Rules’) revising the framework in relation to transferability and creation of encumbrances over unlisted securities of private limited companies (‘Issuers’). These changes, together with the earlier Circular of NSDL dated June 3, 2025 (‘NSDL June Circular’), mark a material shift in the regulatory landscape for private company shares held in dematerialized form.

As a precursor, the NSDL June Circular mandated that any demat account holder seeking to transfer shares of a private limited company must submit, in addition to a duly filled and signed ‘Delivery Instruction Slip’, a consent or confirmation letter issued by the Issuer to the Depository Participant (‘DP’). This requirement, introduced pursuant to Section 2(68) of the Companies Act 2013, is intended to facilitate the implementation of restrictions on share transfers as set out in the articles of association of private companies.

NSDL has, by a Circular dated August 11, 2025, introduced the following key changes:

i. Restricted transferability: An Issuer may now formally request NSDL to restrict: (a) transfer of its unlisted securities; and/or (b) creation of pledge, margin pledge, hypothecation or any form of encumbrance over such securities. Upon verification of the Issuer’s request, NSDL may approve the imposition or removal of such restrictions; and

ii. Freezing and unfreezing: An Issuer may request NSDL to freeze or unfreeze its unlisted securities by submitting a written request. NSDL will process such requests upon verification and, if found in order, will effect the freeze or unfreeze accordingly.

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