Dematerialisation of shares for private companies (rule 9B)
Private companies other than small companies must hold and transfer securities in demat form under rule 9B. The main compliance deadline was 30 June 2025.
Short answer
Dematerialisation of shares means converting physical share certificates into electronic holdings in a demat account with a depository. Under rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014, inserted in 2023, private companies other than small companies must issue securities only in demat form and facilitate dematerialisation of existing securities.
- Rule
- Rule 9B, Prospectus and Allotment Rules
- Exempt
- Small companies and government companies
- Main deadline
- 30 June 2025 (extended by MCA in February 2025)
- Half-yearly report
- Form PAS-6
What rule 9B requires
A covered private company must obtain an ISIN through a depository such as NSDL or CDSL, usually via a registrar and transfer agent. It must then issue all new securities in demat form. Promoters, directors and key managerial personnel must dematerialise their holdings before transferring shares or subscribing to new ones. Securities can be bought back, issued as bonus or rights, or transferred only in demat form once the rule applies. Companies must file Form PAS-6, a reconciliation of share capital audit report, every half-year.
Who is covered and when
The rule applied to private companies that were not small companies as on 31 March 2023, with a deadline that MCA extended to 30 June 2025. A company that ceases to be a small company later has 18 months from the end of that financial year to comply. The small company limits were raised to ₹10 crore paid-up capital and ₹100 crore turnover from 1 December 2025, so check your status each year against the current limits.
Why it matters for startups
Most funded startups that crossed the earlier small company limits had to move to demat. Even where the rule does not yet apply, investors often prefer demat holdings because transfers are faster and records cleaner. Budget for depository and registrar fees, and make sure all shareholders, including foreign investors and employees, open demat accounts in time.
Related services
Sources
- Compliance Calendar: MCA extends demat deadline for private companies
- Ministry of Corporate Affairs (MCA) portal
- TaxGuru: 25 major tax, GST and company law reforms of 2025
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Do small private companies need to dematerialise shares?
No. Small companies are excluded from rule 9B, but they may choose to dematerialise voluntarily.
What is an ISIN?
An International Securities Identification Number is a unique code for each class of security, issued by a depository so the shares can be held in demat form.
What is the penalty for not complying with rule 9B?
Penalties apply under the Companies Act, and non-compliant companies face restrictions on issuing, transferring or buying back securities.