What the rule requires
Rule 9B was added in October 2023 to bring private company shareholdings into the depository system, the way listed and unlisted public companies already are. It works in two directions: the company must issue new securities only in demat form, and existing holders must convert before they can do anything with their shares.
- The company issues securities only in dematerialised form, and helps holders dematerialise existing certificates.
- Before any issue of securities, buy-back, bonus or rights offer, the holdings of promoters, directors and key managerial personnel must be in demat form.
- A shareholder who wants to transfer shares, or subscribe to new ones, must first have their existing holding in demat form.
- The company keeps its dues to the depositories and the RTA paid; a company in default of those can't make a fresh issue.
Is your company exempt as a small company?
The small company limits were raised with effect from 1 December 2025 to paid-up capital of up to ₹10 crore and turnover of up to ₹100 crore. A company must meet both. A holding company, a subsidiary, a Section 8 company and a company governed by a special Act can't be a small company, whatever its size — so a small subsidiary of another company is still covered by Rule 9B.
The test is applied as at the end of a financial year. A company that stops being a small company later has 18 months from the end of that year to comply, so it's worth checking every year rather than once.
Documents required
- Certificate of incorporation, MOA and AOA.
- Audited financial statements for the latest year, to confirm the small company position.
- Register of members and details of every share certificate issued.
- Board resolution approving dematerialisation and the appointment of the RTA.
- PAN and demat account details of shareholders — collected as they convert.
How we handle it
Confirm the obligation
We check the small company test, the company's structure and the applicable deadline.
Appoint an RTA
A SEBI-registered Registrar and Transfer Agent is appointed by board resolution.
Tripartite agreements and ISIN
Agreements are signed with NSDL and CDSL through the RTA, and an ISIN is obtained for each class of security.
Shareholder conversion
Shareholders open demat accounts and submit dematerialisation requests through their depository participants; the RTA and company confirm them against the register.
Ongoing reporting
Holdings are reconciled, and the half-yearly reconciliation of share capital audit report (Form PAS-6) is filed where applicable.
Practical notes from our engagements
- Share certificates that don't match the register. Old transfers never recorded, or certificates lost, have to be sorted out before the RTA can confirm conversion.
- Promoters converting last. Promoter, director and KMP holdings must be in demat before any fresh issue — leave them to the end and a funding round waits.
- Assuming small-company status carries on. The test is annual. A subsidiary never qualifies, and growth past the limits starts an 18-month clock.
How we handle dematerialisation
We confirm whether the rule applies, co-ordinate the RTA, depository agreements and ISIN, reconcile the register of members, and help shareholders through the conversion. Where a share allotment or transfer is waiting on it, we plan the steps so the transaction isn't held up.
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Frequently asked questions
Do all private companies have to dematerialise their shares?
No. Small companies and government companies are exempt, along with certain other categories the rule sets out. A subsidiary or holding company can't be a small company, so it's usually covered.
What is a small company now?
From 1 December 2025, a private company with paid-up capital of up to ₹10 crore and turnover of up to ₹100 crore — both conditions — and which isn't a holding, subsidiary, Section 8 or special-Act company.
What was the deadline?
For companies covered as at 31 March 2023, the deadline was extended to 30 June 2025. A company that becomes covered later has 18 months from the end of that financial year.
Can a shareholder transfer physical shares now?
Not once the rule applies to the company. The shares must be dematerialised before they're transferred.
What happens if the company doesn't comply?
It can't make a fresh issue, buy-back, bonus or rights offer until the conditions are met, and a penalty can be imposed on the company and its officers under Section 450.
Who issues the ISIN?
The depositories — NSDL and CDSL — through a SEBI-registered Registrar and Transfer Agent the company appoints.