Rule 9B: Share Dematerialisation for Private Companies

Quick answer

Rule 9B requires every private company that is not a small company to issue its securities only in dematerialised form and to dematerialise all its existing securities. The clock is eighteen months from the close of the financial year in which the company was not small — not a single national deadline. A company that failed the small-company test at 31 March 2025 must comply by 30 September 2026.

Almost everything written about rule 9B describes it as a deadline that expired on 30 September 2024. That is wrong in two separate ways, and both errors point the same direction: they tell companies that are still inside the window that they have already missed it, and they tell companies that will be caught next year that the rule does not concern them.

Who this is for

You run, advise or invest in an unlisted private limited company, and you want to know whether your shares have to go electronic, by when, and what happens if they do not. It is written for the person who signs the share transfer form and the person who is about to raise a round — because those are the two moments when an unnoticed rule 9B problem stops everything.

It does not cover listed companies or unlisted public companies, which are on rule 9A and have been since 2018. It does not cover LLPs, which have no shares. And it is not a guide to choosing a depository participant, which is a commercial decision with no statutory content.

Where the rule comes from

Rule 9B was inserted into the Companies (Prospectus and Allotment of Securities) Rules, 2014 by G.S.R. 802(E) dated 27 October 2023, made under section 29 read with section 469 of the Companies Act, 2013. The same notification also dealt with old share warrants issued by public companies before the 2013 Act, which is why it is sometimes filed away under a heading that has nothing to do with private companies.

Sub-rule (1) states the obligation:

Every private company, other than a small company, shall within the period referred to in sub-rule (2) — (a) issue the securities only in dematerialised form; and (b) facilitate dematerialisation of all its securities, in accordance with provisions of the Depositories Act, 1996 and regulations made thereunder.

Two verbs, and they do different work. Issue is forward-looking: from the compliance date, every fresh allotment is electronic. Facilitate dematerialisation of all its securities is backward-looking: the company has to make it possible for existing holders to convert what they already hold. The company cannot force a shareholder to open a demat account, which is why the rule says facilitate — but as the next section shows, the shareholder who declines finds out soon enough.

Note also that the rule says securities, not shares. Preference shares and debentures are securities too, and each class needs its own ISIN.

The part everyone gets wrong: it is a rolling test

Sub-rule (2) sets the timing, and it is worth reading slowly:

A private company, which as on last day of a financial year, ending on or after 31st March, 2023, is not a small company as per audited financial statements for such financial year, shall, within eighteen months of closure of such financial year, comply with the provisions of this rule.

There is no fixed calendar date anywhere in that sentence. The test is applied at each financial year end, to that year's audited financial statements, and the eighteen months run from that year end. The rule catches a company in whichever year it stops being small, and it gives that company eighteen months from that point.

So there is not one deadline. There is a different deadline for each cohort:

The arithmetic in the middle column is simply eighteen months added to the year end; the eighteen-month period and the year-end test are the rule's own.

If your company crossed the small-company threshold for the first time in the year ended 31 March 2025 — which is what happens to a business that grew through FY 2024-25 — then your date is 30 September 2026, and as this is written that is around six weeks away.

Both amendments, because both change the answer

Rule 9B has been amended twice since it was inserted, and neither amendment is optional reading.

G.S.R. 583(E) dated 20 September 2024 added a first proviso to sub-rule (2):

Provided that a producer company covered under this sub-rule shall, within a period of five years of closure of such financial year, comply with the provision of this sub-rule.

A producer company therefore gets five years, not eighteen months, from the relevant year end.

G.S.R. 131(E) dated 12 February 2025 added a second proviso:

Provided further that a private company, other than a Producer company, which is not a small company as on 31st March, 2023, may comply with the provision of this sub-rule by 30th June, 2025.

This is the one that matters for the "the deadline was September 2024" claim. For the first cohort — companies that were not small as at 31 March 2023 — the date was moved to 30 June 2025. The notification carries an explanatory memorandum declaring that issuing it with retrospective effect prejudices no one, which is how a date that had already passed was moved after the fact.

Both provisos were published after most of the commentary on rule 9B was written, which is why so much of that commentary is now wrong. If you are relying on an article, a checklist or a reminder email dated before September 2024, assume it does not know about either.

Are you a small company? The test that catches people out

Everything turns on section 2(85) of the Companies Act, 2013. A small company means a company, other than a public company, that satisfies both prescribed limits:

The prescribed amounts come from rule 2(1)(t) of the Companies (Specification of Definition Details) Rules, 2014, as substituted by G.S.R. 700(E) dated 15 September 2022. The Act itself sets the outer ceilings the Government may prescribe — up to ₹10 crore and ₹100 crore — which is a different thing from the limits actually in force, and the two are frequently confused.

Then comes the proviso, and this is where most of the surprises live. Nothing in the small-company definition applies to:

• a holding company or a subsidiary company;
• a company registered under section 8; or
• a company or body corporate governed by any special Act.

These exclusions are absolute and have nothing to do with size. A wholly-owned subsidiary with ₹1 lakh of paid-up capital, two shareholders and no revenue is not a small company, because it is a subsidiary. It is therefore inside rule 9B from its first financial year end on or after 31 March 2023.

That single line catches an enormous number of companies: every group structure with an intermediate holding company, every startup that set up a subsidiary for a separate business line, every Indian subsidiary of a foreign parent. If you have registered an Indian subsidiary, rule 9B applies to it however small it is.

Two more practical notes on the test. It runs on the audited financial statements for that year, so it is not a judgement call — it is whatever your signed accounts say. And the turnover limb looks at the immediately preceding financial year, so status can flip from one year to the next; check it each year rather than assuming last year's conclusion still holds.

Government companies are outside rule 9B entirely, by sub-rule (6).

What actually breaks if you do not comply

Rule 9B does not state a rupee penalty, and we are not going to invent one. What it does instead is more immediate: it disables the transactions you would want to do anyway.

Transfers stop. Rule 9B(4)(a): a holder who intends to transfer securities on or after the company's compliance date shall get such securities dematerialised before the transfer. There is no workaround. A founder selling to an incoming investor, a departing employee exercising a right to sell, a family transfer between promoters — all of them stall until the ISIN exists and the seller's holding is electronic. Our share transfer service runs into this constantly.

Fundraising stops. Rule 9B(3): before making any offer of securities, buyback, bonus issue or rights offer after the compliance date, the company must ensure that the entire holding of securities of its promoters, directors and key managerial personnel has been dematerialised. Note entire — a single un-dematerialised promoter holding is enough to block the whole round. This is the one that hurts, because it surfaces during a transaction, under a timetable, when an ISIN takes weeks.

Subscription stops. Rule 9B(4)(b): anyone subscribing to securities by private placement, bonus or rights on or after the compliance date must hold all their securities in dematerialised form before subscribing. So even a willing new investor cannot come on to the register while their existing holding is on paper.

Read together, these mean that a company outside rule 9B compliance is not merely in technical default — it is frozen for exactly the corporate actions that matter. Non-compliance is discovered by a term sheet.

What compliance actually involves

There is no MCA form for dematerialising. The work happens with a depository, and only the reporting comes back to MCA.

1. Test your status. Take the audited financial statements for each year end from 31 March 2023 onwards and apply section 2(85), exclusions first. Establish which year end caught you, and add eighteen months.
2. Appoint a Registrar and Transfer Agent (RTA). The RTA maintains the electronic register and is your interface to the depository.
3. Pass a board resolution approving dematerialisation and the appointment of the RTA and depository.
4. Execute the tripartite agreement between the company, the RTA and the depository — NSDL or CDSL, or both.
5. Obtain an ISIN for each class of securities. An International Securities Identification Number is the unique code for that class; equity shares, preference shares and debentures each need their own.
6. Reconcile the register of members against the physical certificates before you lodge. This is where the delays actually happen — see below.
7. Shareholders open demat accounts and lodge their certificates with their depository participant for conversion.
8. File PAS-6 for each half year thereafter.

Steps 2 to 5 take a few weeks if the paperwork is clean. Step 7 has no fixed timeline, because it depends on individual shareholders.

PAS-6, and an honest caveat about it

Rule 9B(5) applies sub-rules (4) to (10) of rule 9A mutatis mutandis to dematerialisation under rule 9B. That is the hook that carries the PAS-6 obligation across from unlisted public companies to private companies.

MCA's own PAS-6 instruction kit states the governing law as "Sub Rule 8 of Rule 9A and 9B" of the Companies (Prospectus and Allotment of Securities) Rules, 2014, and sets the filing window at sixty days from the conclusion of each half year, certified by a company secretary in practice or a chartered accountant in practice. The same kit excludes small companies, Nidhi companies, government companies and wholly owned subsidiaries of unlisted public companies from PAS-6.

The caveat, stated rather than hidden: the purpose paragraph of that same kit still describes PAS-6 as a form for "every unlisted public company", which is rule 9A's language and predates rule 9B. So MCA's kit is internally inconsistent — its governing-law line and its exclusion list reach rule 9B while its narrative paragraph does not. The rule text is the authority, and rule 9B(5) is unambiguous. Confirm your own filing position before the half-year window closes rather than relying on either reading of the kit.

What it costs

Honestly: we cannot give you a number for the largest component, because there isn't a statutory one.

Depository and RTA charges are commercial prices, revised by those institutions from time to time. Any article that quotes you a precise all-in figure for them is quoting a price it cannot control. Ask your chosen RTA for a current schedule.

The only genuinely statutory MCA fee in the whole exercise is on PAS-6, and it runs on the ordinary per-document scale by nominal share capital.

What goes wrong

These are practical failure modes, not statutory ones — the RTA and the depository refuse the request, and there is no statutory resubmission window to fall back on.

• The register of members does not reconcile with the certificates. Allotments made years ago, never entered; transfers recorded on one side only; a rights issue that was resolved but never allotted. The RTA cannot certify an ISIN request against a register that does not tie out.
• Certificates were never physically issued. Very common in small companies: the allotment happened, the register was updated, and no certificate was ever printed or signed. There is nothing to surrender for conversion, so the certificates have to be issued first, correctly stamped, before they can be dematerialised.
• Distinctive numbers are missing or overlapping. Share certificates need distinctive numbers that run continuously across the whole issued capital. Reconstructing them retrospectively is slow.
• A class of securities is forgotten. Preference shares and debentures need their own ISINs. Companies routinely dematerialise equity and discover the omission at the next transaction.
• A shareholder will not cooperate. An estranged co-founder, an untraceable early angel, an estate that has not been administered. The company can only facilitate; it cannot open the account. Where that holding belongs to a promoter, director or KMP, rule 9B(3) means it blocks fundraising for everyone.
• Starting during a transaction. By far the most expensive mistake. The ISIN is not a same-week item.

A worked example

Assume a private limited company with a 31 March year end, two promoters and one angel investor, paid-up capital of ₹1.2 crore, and turnover that reached ₹47 crore in the year ended 31 March 2025. It is not a subsidiary of anything.

• FY 2022-23 and FY 2023-24: turnover under ₹40 crore and capital under ₹4 crore, so it was a small company at both year ends. Rule 9B did not apply.
• FY 2024-25: turnover of ₹47 crore per the audited accounts exceeds ₹40 crore, so as at 31 March 2025 it is not a small company. Rule 9B(2) is triggered on that year end.
• Deadline: eighteen months from 31 March 2025 is 30 September 2026.
• What that means in practice: by that date the company needs an RTA, a tripartite agreement, an ISIN for its equity shares, and its existing holdings dematerialised so far as the holders cooperate. All three shareholders should have demat accounts.
• If it planned a Series A in early 2027: rule 9B(3) would require both promoters' and any director's or KMP's entire holdings to be dematerialised before the offer. Leaving the ISIN until the term sheet arrives would put a multi-week dependency directly on the critical path.
• If it drops back below ₹40 crore in FY 2025-26: the obligation crystallised on the 31 March 2025 year end. Falling back does not undo it, and in any event the rule requires issue only in dematerialised form going forward.

The point of the example is the ordering. Nothing here is difficult; it is only slow, and it is only ever discovered late.

What to do now

1. Pull the audited financial statements for every year end from 31 March 2023 onwards.
2. For each, apply section 2(85) — exclusions first. If the company was a holding or subsidiary company at that year end, it was not small, and nothing else in the test matters.
3. Find the earliest year end at which it was not small. Add eighteen months. That is your date; if it has passed, you are already late and the transactional blocks are already live.
4. If the date is ahead of you, work back: allow a few weeks for the RTA and ISIN, and longer for shareholders.
5. Reconcile the register of members against the physical certificates before you approach an RTA. This is the step that determines whether the rest takes three weeks or three months.
6. Diarise PAS-6 for each half year once the ISIN is live.
7. Re-test at every future year end, because a small company that grows — or becomes a subsidiary — enters rule 9B on that year end.

If you would rather not run the test yourself, our demat of shares service does exactly this: an applicability opinion against your audited figures, then the RTA, ISIN and conversion. It sits alongside the rest of your company compliance calendar, and the ROC annual filing checklist covers the filings that run in parallel with it.

Sources and currency

Applies to: Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014 as amended to 12 February 2025. India — Companies Act, 2013.

Rule text and both amending notifications were read from the Gazette PDFs retrieved from MCA's own notifications index on 2026-08-20. Rules, forms and dates change by notification; confirm the current position on the MCA portal before you act. Nothing here is a substitute for advice on your company's own facts.

• G.S.R. 802(E) dated 27 October 2023 — Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023, inserting rule 9B
• G.S.R. 583(E) dated 20 September 2024 — proviso giving producer companies five years
• G.S.R. 131(E) dated 12 February 2025 — proviso allowing the 31 March 2023 cohort until 30 June 2025
• MCA instruction kit — Form PAS-6 (rule 9A and 9B; sixty days from each half year; exclusions)
• Companies Act, 2013 — consolidated bare Act (India Code): s.2(85) small company, s.29 securities in dematerialised form