Learn · 4 min read
Rule 9B: your private company probably has to demat its shares
Are you covered by Rule 9B?
- Small company (paid-up ≤ ₹4cr AND turnover ≤ ₹40cr)
- Not covered — for now
- Holding or subsidiary company
- ALWAYS covered, regardless of size
- Ceased to be small
- Covered 18 months after that FY end
- Covered means
- ISIN via NSDL/CDSL through an RTA; new issues in demat only; PAS-6 half-yearly
For decades, private-company shares in India lived on paper: a certificate, a folio number, a register. Rule 9B of the PAS Rules ended that for most companies that matter: private companies that are not "small" must dematerialise their securities.
The test for small is two-limbed — paid-up share capital of 4 crore rupees or less AND turnover of 40 crore rupees or less, measured at the financial year end. Fail either limb and you are covered. Holding companies and subsidiaries are never small, whatever their size. And the transition is generous but finite: a company that ceases to be small enters Rule 9B eighteen months from that financial year end.
Being covered changes the plumbing: you need an ISIN (issued via NSDL or CDSL, through a Registrar and Transfer Agent), new allotments must be in demat form, promoters and directors must demat their own holdings before the company can issue or buy back, and the PAS-6 half-yearly reconciliation becomes part of your calendar.
A quiet consequence most founders miss: stamp duty on demat issues is collected by the depository automatically — a different mechanic from the physical-certificate world, and one your reconciliation should account for.
This explainer is general information, not legal or tax advice. Statutes change and facts differ — confirm decisions with a practising CS/CA.
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