Last reviewed: 19 August 2026. If your private company's shares are still on paper certificates, that may no longer be a choice. Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014 requires every private company that is not a small company to dematerialise its securities and route future issues and transfers through a depository — and the definition of "small company" that decides who is exempt was widened sharply with effect from 1 December 2025. A good number of companies that were covered a year ago may no longer be, and a good number that assumed they were exempt may now need to check again on the new numbers.
What Rule 9B actually requires
Rule 9B was inserted into the Companies (Prospectus and Allotment of Securities) Rules, 2014 by a notification dated 27 October 2023. In substance it extends to private companies the same discipline that unlisted public companies have followed for years: securities must exist in dematerialised form, held through a depository (NSDL or CDSL) via a Registrar and Transfer Agent, rather than as physical share certificates. A covered company gets 18 months from the end of the financial year in which it stops being a "small company" to fall in line — for a company whose financial year ended 31 March 2023 and which was already not small on that date, the compliance date was 30 September 2024; a company that crosses the threshold later gets its own 18-month runway measured from its own year-end.
The exemption that just got much wider
Whether Rule 9B applies to your company turns entirely on whether it counts as a "small company" under Section 2(85) of the Companies Act, 2013 — and that definition changed materially on 1 December 2025.
| Threshold | Before 1 Dec 2025 | From 1 Dec 2025 |
|---|---|---|
| Paid-up share capital | Up to ₹4 crore | Up to ₹10 crore |
| Turnover | Up to ₹40 crore | Up to ₹100 crore |
A private company is "small" — and outside Rule 9B — only if it meets both limits on the relevant balance sheet. Three categories can never be small regardless of how low their numbers are: a holding company, a subsidiary company, and a Section 8 (not-for-profit) company. If your private company sits as a subsidiary inside a group, the size test simply does not help you, however modest its own turnover.
Worked example
A Thane-based manufacturing private company has paid-up capital of ₹7 crore and turnover of ₹62 crore for FY 2025-26. Against the pre-December-2025 limits (₹4 crore / ₹40 crore), it would have failed the small-company test on both counts and been squarely inside Rule 9B. Against the current limits (₹10 crore / ₹100 crore), it comfortably qualifies as a small company and is, for now, outside the mandate. That is a real, material change for a real category of mid-sized private companies — and it cuts both ways: a company that assumed it was covered under the old numbers should re-test, and equally a company that assumed exemption under casual "we're small" reasoning should not skip the arithmetic, since growth in the current year can pull it back in.
Once you are covered: what changes in practice
- New allotments of any security class must be made directly in dematerialised form — no fresh physical certificates.
- Promoters, directors and key managerial personnel must dematerialise their existing holdings before the company processes any further issue, transfer, or buyback.
- Other members may continue holding physical certificates for the time being, but cannot transfer or subscribe to a fresh issue until they demat.
- The company must file Form PAS-6 twice a year, reconciling issued capital against what is actually held in demat and in physical form.
Form PAS-6 — the recurring obligation once ISIN exists
| Half-year | Covers | Due date (60 days from half-year end) |
|---|---|---|
| April – September | Reconciliation as on 30 September | On or about 29 November |
| October – March | Reconciliation as on 31 March | On or about 29-30 May |
PAS-6 must be certified by a practising Company Secretary or Chartered Accountant before it reaches the Registrar, and it is filed even in a half-year with zero share movement — the reconciliation itself, not the activity, is what the form is checking.
What non-compliance actually costs
Beyond the routine additional-fee ladder for a late PAS-6 (rising in multiples of the normal fee the longer the delay runs), Rule 9B non-compliance more broadly falls back on the general penalty under Section 450 of the Companies Act, 2013 — up to ₹2,00,000 for the company and ₹50,000 for every officer in default, with a further daily penalty if the default continues. In our experience the sharper cost is commercial rather than statutory: an uncovered gap in dematerialisation is precisely the kind of finding that stalls a term sheet or a bank facility at the diligence stage, discovered at the worst possible moment rather than fixed calmly in advance.
Once applicability is confirmed, the practical next step is setting up the RTA and depository relationship itself — our companion guide on the ISIN generation process, RTA and corporate action mechanics walks through exactly how that gets done, and our documents checklist lists what your team should have ready before the first call. Also worth diarising alongside your other ROC dates on the FY 2026-27 compliance calendar, and cross-referenced with your AOC-4/MGT-7 annual filing season since both draw on the same financial statements.
Frequently asked questions
We are a small, closely-held private company. Are we automatically exempt?
Not automatically — you have to actually meet the small-company test on the relevant balance sheet date, and the test changed on 1 December 2025. A company that was covered by Rule 9B in early 2025 may have fallen out of the mandate purely because the thresholds moved, without anyone re-checking. Re-run the test against your latest audited financials before assuming either way.
Does Rule 9B apply even if we have only two or three shareholders?
Yes. The mandate is triggered by the company's classification — private company that is not a small company — not by how many shareholders it has or how closely held it is. A two-founder company that has crossed the paid-up capital or turnover threshold is covered the same as a widely-held one.
Once ISIN is generated, must every existing shareholder demat their shares immediately?
Not immediately for every holder, but practically yes for anyone who wants to transact. The company itself must ensure promoters, directors and KMPs dematerialise their holdings before any further issue, transfer, or buyback proceeds. Other members can hold physical shares longer, but the moment they wish to subscribe to a fresh issue or transfer shares, dematerialisation becomes a precondition.
What if we file PAS-6 late or not at all?
PAS-6 carries the standard Companies (Registration Offices and Fees) Rules, 2014 additional-fee ladder for delay, rising with the length of default, and non-compliance with the Rule 9B framework more broadly attracts the general penalty under Section 450 — up to ₹2,00,000 for the company and ₹50,000 for every officer in default, with a further daily penalty for continuing default. Beyond the fee, an unfiled PAS-6 is exactly the kind of gap a due-diligence exercise flags during a funding round.
Holding companies and subsidiaries are always 'small' if their numbers are low — true?
No — this is a common misreading. A company that is itself a holding company or a subsidiary company, or a Section 8 company, cannot qualify as a small company regardless of its paid-up capital or turnover. If your private company sits inside a group structure as a subsidiary, check this exclusion specifically before relying on the size test.
We crossed the threshold this year — from when does the 18-month clock start?
From the end of the financial year in which the company ceases to be a small company, not from the date you notice it. In practice this means the compliance conversation should happen at the audit-finalisation stage, not months later when a transaction forces the question.
Somesh Chandak & Associates, Thane, runs the small-company test against your latest financials, maps out the gap list if you're covered, and prepares and files PAS-6 on an ongoing basis.
ISIN & Demat Applicability Review ISIN & Depository Setup Book a consultationThis article is for general information and education only and is not professional advice. It reflects Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014 as notified on 27 October 2023, and the revised small-company thresholds effective 1 December 2025. Please verify your company's specific position and current MCA guidance with us before acting.