The company was set up shortly after a meeting in 1837 in which British colonial authorities commenced plans to build and operate a railway between Georgetown and the Mahaica River. In October 1845, a management committee was appointed to supervise the construction of the project. Eventually, a bill proposing the construction of the railway was passed by the Court of Policy in July 1846. The railway was very popular among the people on the East Coast Demerara, and soon there were demands for it to be extended further to Rosignol on the west bank of the Berbice River, 62 "railway" miles east of Georgetown. But it was not until 1890 that the government granted a contract to the Demerara Railway Company to build the line between Mahaica and Rosignol, and also another line between Vreed-en-Hoop and Tuschen west of the Demerara River. The Demerara Railway Company was later sold to the Colonial Transport Department of the government, which took over control of the railway services from 1 January 1922.