Rule 9B changes the way a covered private company can issue, transfer and maintain its securities. Once the rule applies, the company is not merely expected to convert old share certificates into electronic form. It must facilitate dematerialisation, issue securities only in dematerialised form, respect transaction restrictions for promoters and security holders, and continue with the depository-related compliance that Rule 9B imports from Rule 9A.
The starting point is the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023, which inserted Rule 9B. The practical question for a private company is therefore not simply whether it has physical share certificates. It is: for which financial year did the company first become a non-small private company under the rule, and what compliance date follows from that year?
Who comes within Rule 9B?
Rule 9B(1) applies to every private company other than a small company. Rule 9B(6) separately says that the rule does not apply to a Government company.
The phrase “small company” has a statutory meaning under Section 2(85) of the Companies Act, 2013. Under the current prescribed limits, effective from 1 December 2025, paid-up capital must not exceed ₹10 crore and turnover must not exceed ₹100 crore. Both financial conditions matter. The current Act also excludes a holding company, subsidiary company, Section 8 company and a company or body corporate governed by a special Act from the small-company definition. The current statutory text is available in the Companies Act, 2013 on India Code, and the revised ₹10 crore/₹100 crore limits were notified through the Companies (Specification of definition details) Amendment Rules, 2025.
If the small-company classification itself is uncertain, first work through the separate small-company eligibility test and exclusions. That classification can decide whether Rule 9B is triggered at all.
The compliance date is tied to a financial-year-end test
Rule 9B(2) does not create one permanent calendar deadline for every private company. It says that a private company which, on the last day of a financial year ending on or after 31 March 2023, is not a small company as per the audited financial statements for that year must comply within 18 months from closure of that financial year.
This produces a rolling test. A company that first becomes non-small at a later year end can enter the rule later than the original 2023 cohort. For example, if a private company first falls outside the small-company category as at 31 March 2025, the ordinary 18-month calculation points to 30 September 2026. If it first falls outside the category as at 31 March 2026, the ordinary calculation points to 30 September 2027.
The important control is historical classification. Do not look only at the company’s status today. The Rule 9B trigger is linked to whether the company was non-small at the relevant financial-year end, so the working paper should retain the audited capital, turnover and entity-status evidence used for each year.
Two amendments changed the ordinary timeline
The original 18-month rule has two important provisos.
- Producer companies: the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2024 give a Producer company covered by Rule 9B(2) five years from closure of the relevant financial year instead of the ordinary 18 months.
- The 31 March 2023 non-small cohort: the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2025 allowed a private company, other than a Producer company, that was not a small company as at 31 March 2023 to comply by 30 June 2025.
Those special rules should not be converted into a blanket statement that every private company had a 30 June 2025 deadline. The 2025 extension was written specifically for the cohort that was non-small on 31 March 2023. A later first-time non-small company should calculate the date from its own relevant financial year unless another amendment applies.
What must the company do once Rule 9B applies?
Rule 9B(1) requires the covered private company to issue securities only in dematerialised form and to facilitate dematerialisation of all its securities. Rule 9B(5) then applies Rule 9A(4) to Rule 9A(10), with the necessary changes, to a Rule 9B company.
That imported framework is why the compliance work goes beyond collecting demat account details from shareholders. In practical terms, the company has to establish the depository infrastructure needed for its securities, secure an International Securities Identification Number, or ISIN, for each type of security, inform existing security holders about the dematerialisation facility, keep the prescribed depository and registrar arrangements in good standing, and comply with the continuing reconciliation and grievance framework.
Where a company has different security classes, the ISIN and reconciliation work should be performed security by security. Equity shares and preference shares, for example, should not be merged into one unexplained capital population.
A fresh issue or buyback can be blocked by physical holdings of promoters and management
Rule 9B(3) creates a transaction gate after the company’s compliance date. Before the covered private company makes an offer for issue of securities, undertakes a buyback, issues bonus shares or makes a rights offer, the entire holding of its promoters, directors and key managerial personnel must be dematerialised.
This means a fundraising or capital action can fail at the readiness stage even when the Board and shareholder approvals are otherwise in place. Before planning an allotment, rights issue, bonus issue or buyback, the company should first confirm that the promoter, director and KMP holdings satisfy the demat condition.
For a bonus issue, this Rule 9B test sits alongside the separate requirements for eligible reserves, authorised capital and Section 63 compliance. Passing one set of conditions does not remove the other.
A shareholder may also be unable to transfer or subscribe while holding physical securities
Rule 9B(4) imposes a separate requirement on security holders after the company’s compliance date.
- A holder who intends to transfer securities must get those securities dematerialised before the transfer.
- A holder who intends to subscribe to securities of the company through private placement, bonus issue or rights offer must ensure that all securities held by that person in the company are in dematerialised form before the subscription.
This is why a physical certificate should not automatically be pushed through the ordinary transfer paperwork. Before using a physical transfer instrument, the company must first determine whether dematerialisation is compulsory for that holder and transaction. The distinction is explained further in the Form SH-4 and physical share-transfer guide.
PAS-6 becomes a recurring filing, not a one-time demat form
Rule 9B itself does not name PAS-6 in its first four sub-rules. The filing obligation comes through Rule 9B(5), which imports Rule 9A(4) to Rule 9A(10). Rule 9A(8), which sits inside that range, requires Form PAS-6 within 60 days from the conclusion of each half year, duly certified by a company secretary in practice or chartered accountant in practice.
The official MCA PAS-6 instruction kit describes PAS-6 as the half-yearly Reconciliation of Share Capital Audit Report. The statutory form is built around the half years ending 30 September and 31 March and requires reconciliation for each ISIN separately.
For the detailed capital-reconciliation logic, the existing guide on Form PAS-6 and ISIN-wise share-capital reconciliation is useful. For a private company, however, the first question remains Rule 9B applicability and the date from which the company entered that regime.
A practical Rule 9B working paper
- Classify the company for each relevant year end. Record whether it qualified as a small company and whether any statutory exclusion from the small-company definition applied.
- Identify the first non-small year. Use the audited financial statements and legal entity status as at that year end.
- Calculate the correct compliance date. Apply the ordinary 18-month rule, or the specific Producer-company or 31 March 2023 proviso where applicable.
- Build the depository setup. Complete the arrangements needed to obtain ISINs and facilitate dematerialisation of every covered security type.
- Map physical holdings. Track promoters, directors, KMP and other holders so the company can identify transactions that will be blocked until dematerialisation is completed.
- Control capital actions. Add a Rule 9B readiness check before private placements, rights issues, bonus issues and buybacks.
- Control transfers. Before accepting physical transfer papers, check whether Rule 9B requires dematerialisation first.
- Add PAS-6 to the recurring calendar. Reconcile each ISIN for every half year and complete professional certification within the statutory filing period.
- Retain the historical classification file. Keep the audited figures and legal-status evidence that explains why the company concluded that Rule 9B did or did not apply for a particular year.
Do not reduce Rule 9B to “convert all certificates”
The most useful way to manage Rule 9B is as a transaction-control framework. The company has an applicability test, a compliance date, depository obligations, restrictions before capital actions, restrictions on transfers and subscriptions, and a recurring PAS-6 reconciliation cycle. Treating it as a one-time share-certificate conversion can leave a company technically unready even after some shareholders have opened demat accounts.
Because Rule 9B depends on historical year-end classification and has already been amended more than once, a live transaction should be checked against the current rule text, current small-company definition, applicable exemptions and the company’s own audited history before documents are signed or a capital action is launched.
