Still holding the shares of your private limited company through physical share certificates?

That may no longer be merely an old-fashioned way of maintaining shareholding records.

For many private companies, dematerialisation of securities is now mandatory under Rule 9B, and non-compliance can create problems exactly when the company needs to undertake a share transfer, bring in an investor, make a rights issue, or carry out another corporate action.

And there is an important 2026 update that every private company should know.

The limits for determining a “small company” have been increased to ₹10 crore of paid-up capital and ₹100 crore of turnover with effect from 1 December 2025 vide Gazette Notification No. G.S.R. 880E. This means that the applicability of mandatory demat should now be reviewed carefully instead of relying on the older ₹4 crore/₹40 crore limits.

Let us understand mandatory demat for private companies, Rule 9B applicability, ISIN requirements, and PAS-6 filing in a practical manner.

Mandatory Demat for Private Companies – Quick Overview

Here is the position in simple terms:

• Rule 9B applies to covered private companies that are not small companies.
• A covered company must issue securities only in dematerialised form and facilitate dematerialisation of its existing securities.
• Holding companies, subsidiary companies, and Section 8 companies cannot claim the small-company exemption merely because their capital or turnover is low.
• A company generally needs an ISIN and depository/RTA connectivity for dematerialisation.
• Form PAS-6 is a recurring half-yearly compliance for private companies governed by Rule 9B.
• The much-discussed 30 June 2025 deadline was not a permanent deadline for every private company.

Rule 9B was introduced through the Companies (Prospectus and Allotment of Securities) Second Amendment Rules. It requires every private company other than a small company to issue securities only in dematerialised form and facilitate dematerialisation of its securities.

Does Rule 9B Apply to Your Private Company?

This is the first question to answer.

Rule 9B does not automatically apply to every private limited company.

The compliance structure is also one of the important distinctions businesses should consider while evaluating an LLP vs Private Limited Company.

Broadly, a private company should check whether it qualifies as a small company under Section 2(85) of the Companies Act, 2013.

Current Small Company Limits in 2026

With effect from 1 December 2025, the prescribed limits are:

Both financial conditions need to be considered along with the statutory exclusions.

But Here Is the Important Catch:

Even if the above financial limits are satisfied, the following cannot qualify as a small company:

• A Holding Company;
• A Subsidiary Company;
• A Company registered under Section 8; or
• A Company or body corporate governed by a Special Act.

These exclusions come directly from Section 2(85) of the Companies Act, 2013.

A Common Mistake

Consider a private subsidiary having:

Paid-up capital: ₹20 lakh
Turnover: ₹2 crore

Someone may conclude:

“The company is far below ₹10 crore and ₹100 crore, so demat is not applicable.”

That conclusion would be incorrect.

Since it is a subsidiary company, it cannot qualify as a small company merely on the basis of its financial size.

Therefore, Rule 9B needs to be examined.

This is particularly relevant for foreign subsidiaries, wholly owned subsidiaries, startup subsidiaries and group companies operating in India.

The ₹10 Crore / ₹100 Crore Change Is Important—But Be Careful

The revised small-company limits became effective from 1 December 2025.

This may bring many private companies that were previously outside the small-company limits into the small-company category.

However, companies that had already triggered Rule 9B compliance under the earlier limits should not automatically assume that an earlier default or compliance obligation has disappeared merely because the definition subsequently changed.

The historical applicability period, date on which Rule 9B became applicable, securities already issued and PAS-6 filings already due should be reviewed separately.

In short, the new threshold may change your current position, but it should not be used to ignore past compliance without examining the facts.

What Exactly Does Rule 9B Require?

Once Rule 9B becomes applicable, two requirements become fundamental:

1. New securities must be issued in dematerialised form

The company cannot continue issuing securities through physical certificates after the applicable compliance date.

2. Existing securities must be capable of dematerialisation

The company must create the required infrastructure so that shareholders can convert their physical securities into demat form.

This normally involves:

Company → RTA → Depository → ISIN → Shareholder Demat Account

Rule 9B also places restrictions on transfers, subscriptions and corporate actions after the applicable date.

Do All Existing Shareholders Have to Dematerialise Immediately?

This is one of the most common questions.

The company must facilitate dematerialisation, but the practical trigger for a shareholder becomes particularly important when that shareholder wants to transact.

Under Rule 9B:

If a shareholder wants to transfer securities

The securities must first be dematerialised before the transfer.

If an existing shareholder wants to subscribe to further securities

Where a shareholder subscribes through private placement, rights issue, or bonus issue after the applicable date, the securities already held by that person must be in dematerialised form.

Before certain corporate actions

Before undertaking an offer of securities, buyback, bonus issue, or rights offer, the company must ensure that the entire securities holding of its:

• promoters;
• directors; and
• Key Managerial Personnel

has been dematerialised.

Practical Takeaway

Physical share certificates may appear harmless while nothing is happening.

The problem usually surfaces when the company suddenly wants to:

raise funds, issue shares, transfer shares, restructure capital or bring in an investor.

That is why waiting for a transaction before starting the demat process is usually not a good compliance strategy.

What Is an ISIN?

ISIN stands for International Securities Identification Number.

It is the unique identification number allotted to a particular security admitted into the depository system.

Obtaining an ISIN effectively creates the framework through which securities of the company can be held electronically.

A company having different classes of securities may have to examine the ISIN requirements separately for each class.

How Does a Private Company Obtain an ISIN?

The process sounds complicated, but it becomes manageable when handled systematically.

Step 1 – Check Rule 9B Applicability

First confirm whether the company is covered.

Do not start the process merely because someone says, “Demat is compulsory for every private company.”

Step 2 – Reconcile Share Capital

Before approaching the RTA, check:

• authorised capital;
• issued and paid-up capital;
• Register of Members;
• share certificates;
• distinctive numbers;
• previous allotments;
• transfers; and
• ROC filings.

Any mismatch discovered later can delay the process.

Step 3 – Appoint an RTA

The company appoints a suitable Registrar and Share Transfer Agent (RTA) for depository connectivity.

CDSL also provides an online admission facility for unlisted companies through its Unlisted Issuer Application System.

Step 4 – Complete Depository Documentation

Required corporate documents, resolutions, capital details, and undertakings are submitted through the prescribed process.

Step 5 – Obtain ISIN

Once the documentation is accepted, the security is admitted to the depository system, and the relevant ISIN is allotted.

Step 6 – Facilitate Shareholder Demat

Shareholders can thereafter submit their physical securities through their depository participant for dematerialisation.

Tip: The most common delays often arise not from the depository itself but from discrepancies in old share certificates, statutory registers, and previous allotment records.

What Is Form PAS-6?

Obtaining an ISIN is not the end of demat compliance.

A private company governed by Rule 9B is also required, through the application of Rule 9A(8), to comply with the half-yearly Form PAS-6 requirement.

PAS-6 is essentially used for the reconciliation of the company’s capital between the relevant records and securities held in dematerialised / physical form.

The form is required to be filed within 60 days from the conclusion of each half-year and is certified by a company secretary in practice or chartered accountant in practice.

Companies may also refer to the MCA Instruction Kit for Form PAS-6 while preparing the half-yearly filing.

PAS-6 Due Dates

For companies to which PAS-6 applies, the normal filing cycle is:

Therefore, PAS-6 should be treated as a recurring compliance, not as a one-time form filed when the ISIN is obtained.

No change in shareholding during the half-year does not, by itself, convert a recurring statutory filing into an optional filing.

Is 30 June 2025 Still the Demat Deadline?

This is where many online articles create confusion.

30 June 2025 was a specific extended compliance date, not a universal future deadline for all private companies.

Under the original Rule 9B framework, a private company that was not a small company as on the last day of a financial year ending on or after 31 March 2023 was required to comply within 18 months from the closure of that financial year.

MCA subsequently provided a special extension whereby a private company, other than a producer company, which was not a small company as of 31 March 2023, could comply by 30 June 2025.

Accordingly,

Do not simply search “Rule 9B due date” and assume 30 June 2025 applies to every case.

The relevant financial year and the company’s small-company status need to be examined.

Special Rule for Producer Companies

Producer Companies covered under Rule 9B have been provided a longer period of five years from the closure of the relevant financial year.

ISIN Obtained? Don’t Forget These Continuing Compliances

Once the company enters the demat framework, compliance does not stop at obtaining the ISIN.

Keep track of:

• RTA and depository charges;
• reconciliation of capital;
• dematerialisation requests;
• changes in share capital;
• updated Register of Members;
• depository records;
• corporate actions; and
• half-yearly PAS-6 filing.

A company may proudly say “We have obtained ISIN” and still remain non-compliant if the recurring obligations are ignored.

PAS-6 should therefore form part of the company’s overall annual and periodic compliance framework for private limited companies.

What Happens If PAS-6 or Rule 9B Compliance Is Missed?

Demat non-compliance can have two consequences.

First – Corporate transactions can get stuck

Non-compliance may affect:

• share transfers;
• fresh allotments;
• private placements;
• rights issues;
• bonus issues;
• buybacks;
• fundraising and investor onboarding; and
• transaction due diligence.

Second – Penalty exposure can arise

Where no specific penalty is separately prescribed, Section 450 of the Companies Act, 2013 provides for a penalty of ₹10,000 and, for a continuing contravention, a further ₹1,000 per day, subject to prescribed maximum limits of ₹2 lakh for the company and ₹50,000 for an officer in default or other person.

And PAS-6 should not be treated as a harmless procedural form.

In a July 2026 ROC Cuttack adjudication relating to delayed PAS-6 filing by an unlisted public company, the adjudicating authority treated the delay as a continuing default and imposed the maximum Section 450 penalty upon the company and the concerned officers. While that case arose under Rule 9A, it is a useful reminder of the regulatory approach towards prolonged PAS-6 defaults.

Private Company Demat Compliance Checklist

Before closing your Rule 9B review, confirm these seven points:

1. Is the company currently a small company?
2. Is it a holding, subsidiary, Section 8 or specially governed company?
3. When did Rule 9B first become applicable?
4. Has the company obtained the required ISIN?
5. Are promoters’, directors’ and KMP securities dematerialised where required?
6. Are share capital and RTA/depository records reconciled?
7. Are all applicable PAS-6 filings complete?

If the answer to any of these is uncertain, the compliance should be reviewed before the next share transaction.

Frequently Asked Questions on Mandatory Demat & PAS-6

Final Takeaway

Mandatory demat for private companies is no longer a compliance that should be checked only when shares are about to be transferred.

Rule 9B can directly affect a company’s ability to issue securities, induct investors and undertake important corporate actions.

The change in the small company threshold to ₹10 crore paid-up capital and ₹100 crore turnover from 1 December 2025 has made a fresh applicability review even more important.

The safest approach is simple:

Check applicability → reconcile capital → obtain ISIN → facilitate demat → maintain records → file PAS-6 on time.

A little planning today can prevent a share transaction from becoming an urgent compliance problem tomorrow.

Need Help With ISIN, Demat or PAS-6 Filing?

Legnex Solutions assists private companies with end-to-end demat and Rule 9B compliance, including:

• Rule 9B applicability review;
• share capital reconciliation;
• RTA coordination;
• ISIN creation;
• dematerialisation support;
• promoter/director compliance; and
• preparation and filing of Form PAS-6.

If your company is planning a share transfer, fundraising, rights issue, private placement or other corporate action, checking demat compliance beforehand can save considerable time and avoid last-minute complications.

Speak with Legnex Solutions for professional assistance with Private Company Demat, ISIN and PAS-6 compliance.

Disclaimer: This article is intended for general information and professional awareness. Applicability of Rule 9B and PAS-6 should be examined with reference to the company’s individual facts, historical status, securities structure and applicable MCA notifications.