Dematerialisation of Shares — Private Companies (Rule 9B)
Dematerialisation of shares is compulsory for every private company that is not a small company or a government company, under Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014. The company obtains an ISIN and files PAS-6 every half-year, and shareholders must dematerialise before they transfer. We handle the process from the first board resolution to the first PAS-6.
What it is
Dematerialisation means converting paper share certificates into electronic holdings in a demat account. Each type of security the company has issued gets an ISIN, a unique 12-character code, from a depository: NSDL or CDSL. After that, shares move between demat accounts instead of through share certificates and Form SH-4.
Section 29(1A) of the Companies Act, 2013 lets the Ministry of Corporate Affairs prescribe classes of companies whose securities can be held or transferred only in demat form. Using that power, MCA inserted Rule 9B on 27 October 2023 (G.S.R. 802(E)). It requires every private company other than a small company or a government company to issue securities only in demat form and to help its holders dematerialise.
Who it applies to
Your company is past the small-company limits
Your paid-up capital is above ₹10 crore, or your turnover is above ₹100 crore. A holding or subsidiary company is covered whatever its size, because it cannot be a small company.
A shareholder wants to sell or subscribe
Once the company’s deadline has passed, a holder must dematerialise before transferring shares or subscribing to new ones, under Rule 9B(4).
Promoters, directors and KMP go first
Their entire holdings must be in demat form before the company makes any offer of securities, buy-back, bonus or rights issue.
Why it matters
Keep share transfers moving
Physical shares of a covered company cannot be transferred until they are dematerialised. Say a co-founder of a Faridabad engineering company wants to sell to a new investor. If his shares are still on paper, the sale waits.
Keep your next fund-raise open
Leave promoter, director or KMP shares on paper, or fall behind on depository and RTA fees, and the company cannot issue securities, buy back, or make a bonus or rights issue.
Reconcile your register twice a year
Every half-year, PAS-6 reconciles the capital held in demat and physical form, certified by a practising company secretary or chartered accountant. Errors in the register of members surface twice a year, not at the next due diligence.
Documents required
From the company
- Board resolution approving dematerialisation, the RTA and the depository agreements
- ISIN application on the company’s letterhead, signed by an authorised signatory with the company stamp
- Tripartite agreement between the company, the RTA and the depository
- Latest audited financial statements and the register of members
From each shareholder
- A demat account with a depository participant (DP)
- Original share certificates
- Signed Demat Request Form (DRF)
- PAN and KYC documents for the demat account
For each PAS-6
- Half-yearly capital details from the RTA and depositories
- Certificate of a practising company secretary or chartered accountant
- Valid digital signature certificate (DSC) of a director
Is your company covered?
| Your company | Rule 9B position |
|---|---|
| Small company: paid-up capital up to ₹10 crore and turnover up to ₹100 crore (limits from 1 December 2025), not a holding or subsidiary company | Not covered |
| Government company | Not covered |
| Private company that is a holding or subsidiary company | Covered, whatever its size |
| Not a small company on 31 March 2023 | Deadline 30 June 2025 (extended from 30 September 2024) |
| First not small on a later 31 March | 18 months from that year-end: 30 September 2026 for 31 March 2025, 30 September 2027 for 31 March 2026 |
Status is checked at the end of every financial year, based on the audited figures, so a growing company can come under Rule 9B in any year. Picture a Faridabad auto-parts maker with ₹50 lakh of paid-up capital that is a subsidiary of its promoters’ holding company. It is covered. Size does not help a subsidiary.
Here is the catch: one grey area remains. The small company limits were raised from ₹4 crore and ₹40 crore to ₹10 crore and ₹100 crore with effect from 1 December 2025. Some companies caught under the old limits now fit the new ones. There is no saving clause, and we are not aware of any MCA clarification. One view is that Rule 9B applies year by year; the point is not settled.
How it works
Check your status at the year-end
We test paid-up capital, turnover and holding or subsidiary links as on 31 March, and put your 18-month deadline on your compliance calendar.
Pass the board resolution and appoint an RTA
The RTA links the company with the depositories and processes each demat request.
Apply for an ISIN for each security
Equity and preference shares each need their own ISIN. With NSDL, the application is made online, then printed, signed and submitted with the tripartite agreement.
Pay the depository fees and security deposit
The company pays the joining fee and annual custody fee, and keeps a security deposit of at least two years’ fees with the depository and the RTA at all times.
Move promoter holdings first, then the rest
Each shareholder opens a demat account, then submits a DRF with the original certificates to the DP, which sends the request to the RTA for confirmation. Promoters, directors and KMP go first. In practice, a DRF with a name or signature mismatch can come back, so we check each one before it leaves you.
File PAS-6 every half-year
We prepare and file PAS-6 within 60 days of each half-year, alongside your annual ROC filings.
Timelines
Comply within 18 months of the year-end
A private company that is not a small company on the last day of a financial year ending on or after 31 March 2023 must comply within 18 months of the close of that year.
First wave: finish by 30 June 2025
For companies covered on 31 March 2023, the original date of 30 September 2024 was extended to 30 June 2025 by an MCA notification dated 12 February 2025.
File PAS-6 within 60 days of each half-year
That means by 30 May for the half-year ending 31 March, and by 29 November for the half-year ending 30 September.
What happens if you miss the deadline
Pay the Section 450 penalty
Rule 9B carries no penalty of its own, so the general penalty applies: ₹10,000 on the company and every officer in default, plus ₹1,000 for each day the default continues, up to ₹2 lakh for the company and ₹50,000 for each officer.
Watch transfers freeze
Physical holders cannot transfer their shares or subscribe to new securities until they dematerialise. A deal agreed on price can stall over paperwork.
Put new issues and buy-backs on hold
No offer of securities, buy-back, bonus or rights issue until promoter, director and KMP holdings are in demat form and the depository and RTA fees are paid.
Frequently asked questions
Is dematerialisation of shares mandatory for every private company?
No. Only private companies that are neither small companies nor government companies. Since 1 December 2025, a small company has paid-up capital up to ₹10 crore and turnover up to ₹100 crore, and it cannot be a holding or subsidiary company. Status is tested at the end of each financial year, so we recheck it each year once your accounts are audited.
What is the deadline under Rule 9B?
Eighteen months from the end of the first financial year, ending on or after 31 March 2023, in which the company is not a small company. Companies covered on 31 March 2023 had until 30 June 2025 (extended from 30 September 2024). A company first covered on 31 March 2025 had until 30 September 2026, which has just passed. Missed it? Start now; the steps do not change.
Must every shareholder convert physical shares into demat?
Not immediately. A shareholder who is not a promoter, director or KMP may keep physical shares, but cannot transfer them or subscribe to new securities until they are dematerialised, under Rule 9B(4). Promoters, directors and KMP must hold their entire holding in demat form before the company makes any offer, buy-back, bonus or rights issue. We suggest dematerialising everyone at the start, so no sale gets held up later.
How does a private company get an ISIN?
By applying to a depository, NSDL or CDSL, for each type of security it has issued. With NSDL, the issuer admission form is filled online, printed on the company’s letterhead and signed by an authorised signatory, and a tripartite agreement is signed with the RTA. Once the joining and annual custody fees are paid, the 12-character ISIN follows. We handle each step with the RTA.
Is it compulsory to appoint an RTA?
Not under the Companies Act, if the company has an in-house arrangement. But the depository needs electronic connectivity, either through an existing registrar and transfer agent or through in-house connectivity with the depository itself. An RTA is usually simpler, because it processes demat requests and supplies the data for PAS-6. We help you pick one and sign the agreements.
What is PAS-6 and when is it due?
PAS-6 is the half-yearly reconciliation of share capital audit report filed with the ROC. Rule 9B borrows this duty from Rule 9A, written for unlisted public companies, so a covered private company files it within 60 days of the end of each half-year, certified by a practising company secretary or chartered accountant. That means by 30 May and 29 November. Once the ISIN is in place, we diarise both dates for you.
Our company became a small company after December 2025. Does Rule 9B still apply?
That is not settled yet. The small company limits rose to ₹10 crore paid-up capital and ₹100 crore turnover from 1 December 2025, with no saving clause for companies already caught by Rule 9B. One view is that the rule applies year by year, based on status at each year-end. Until MCA clarifies, we suggest keeping an ISIN you already hold, and we review your case individually.
What is the penalty for not complying with Rule 9B?
The general penalty under Section 450 of the Companies Act: ₹10,000 on the company and every officer in default, plus ₹1,000 a day while the default continues, up to ₹2 lakh for the company and ₹50,000 per officer. The practical cost can be larger, because transfers and new issues stay blocked. Start the ISIN process today. The daily amount stops growing once you comply.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Third-party costs follow the depository’s and RTA’s current tariffs:
| Cost | Paid to | What to expect |
|---|---|---|
| Joining fee and annual custody fee | NSDL / CDSL | As per the depository’s tariff |
| Security deposit | Depository and RTA | At least two years’ fees, kept at all times |
| RTA fees | RTA | As quoted by the RTA |
| Tripartite agreement | Stamp / franking | NSDL asks for three copies, each franked for ₹200 |
| Demat account charges | Each shareholder’s DP | Account maintenance and transaction charges |
| Stamp duty on dematerialisation | — | Nil on the initial demat |
| PAS-6 filing | MCA | Normal MCA filing fee, every half-year |
Ready to begin?
Send us your latest audited accounts and register of members, and we will tell you whether Rule 9B applies, your deadline and the exact steps to an ISIN.