Rule 9B Dematerialisation for Private Companies: The 30 September 2026 Deadline That Blocks Your Next Funding Round

MCA fined Biogenomics Limited ₹31.83 lakh for issuing shares in physical form instead of dematerialised form. That order was passed under the demat rule for public companies. From 30 September 2026, the same principle bites lakhs of private companies for the first time. Rule 9B dematerialisation for private companies is now a hard MCA deadline, and a private company that misses it cannot issue a single new share, close a funding round, or let a shareholder transfer stock until it complies. If your company was not a small company as per its audited FY 2024-25 accounts, the clock runs out in about seven weeks.

The problem: a paperwork rule that freezes your cap table

Rule 9B looks like a filing formality. It is not. It changes what a private company is allowed to do with its own shares. Once the rule applies, the company can issue securities only in electronic form, and it cannot process any fresh allotment, buyback, bonus issue or rights issue unless the securities of its promoters, directors and Key Managerial Personnel are already dematerialised and an ISIN is live. For a founder mid-way through a term sheet, that turns a compliance task into a deal blocker.

The exposure is wide. As of 31 January 2025 there were around 18.14 lakh active private companies on the MCA register. A large share of them cross the small-company thresholds the moment they take on outside capital, hire beyond a small team, or grow revenue past the limit, and the day they do, Rule 9B starts its eighteen-month countdown. Many of the companies now facing the 30 September 2026 date do not realise the rule reaches them, because they were small companies a year ago and only became non-small on their FY 2024-25 numbers.

The penalty section is Section 450 of the Companies Act, 2013, the residual provision that applies where no specific penalty is written into a rule. The money is modest by itself. The commercial consequence is not: an unlisted company that allotted shares in physical form has already drawn MCA penalties under the sister provision, and the direction of enforcement is clear. In the KCP Infra Limited matter, the Registrar penalised the company and its Managing Director ₹10,000 each for allotting 8,05,748 equity shares in physical form. Biogenomics Limited drew ₹31.83 lakh. Those orders were passed under Section 29 read with Rule 9A for public companies, and Rule 9B extends the same logic to private companies.

Which deadline applies to you

The single most misread part of Rule 9B is the deadline, because there is not one date, there is a rolling test tied to the year in which your company became non-small.

What Rule 9B actually requires

Rule 9B was inserted into the Companies (Prospectus and Allotment of Securities) Rules, 2014 by the Second Amendment Rules notified on 27 October 2023. It carries two obligations that run together. First, the company must issue any new securities only in dematerialised form. Second, it must facilitate dematerialisation of all its existing securities in line with the Depositories Act, 1996 and the regulations under it. The original blanket compliance date of 30 September 2024 was extended once, to 30 June 2025, for the first cohort of companies, after depositories struggled to clear the volume of ISIN applications. The rolling eighteen-month test then took over for companies that became non-small in later years.

The definition of a small company sits in Section 2(85) and is tested afresh each year against paid-up capital and turnover limits. This is where founders get caught. A company can be small in one year and non-small the next simply because revenue grew or it raised capital. The audited accounts for FY 2024-25 are the trigger for the 30 September 2026 group, so the demat status of a company that closed a round or scaled up last year needs to be checked against that year end, not against an old assumption.

What you must do now: the eight-step demat process

Dematerialisation is a project with a dependency chain, and the slowest link is the ISIN. Start at the top of this list today if your company is in the 30 September 2026 group.

Two errors show up often. Companies apply for the ISIN late and assume it clears in days; it does not when volumes are high. And companies forget that Form PAS-6 is a standing half-yearly obligation, not a one-time filing, so the compliance calendar needs to carry it every May and November going forward. A missed PAS-6 draws its own Section 450 exposure.

The deeper implication for founders

According to CS Sapna Malpani, the founders who feel Rule 9B most are not the ones who miss the penalty; they are the ones who discover the block in the middle of a round. A lead investor’s counsel runs diligence, finds physical certificates and no ISIN, and the closing slips while the company scrambles to appoint an RTA and wait out the ISIN queue. The rule quietly moved dematerialisation from a nice-to-have onto the critical path of every private company that wants to issue equity, and the companies that treat it as a September problem are the ones that lose weeks they cannot spare.

The direction of travel points one way. MCA has spent three years pulling private companies toward the same transparency standards that public companies carry, from significant beneficial owner reporting to demat, and enforcement is moving to e-adjudication that runs on data the registry already holds. A company that never files Form PAS-6 is visible in the system. The reasonable planning assumption is that Rule 9B checks will fold into routine scrutiny of annual filings, so the cost of ignoring it rises each year rather than fading.

How Rule 9B compares with the provisions people confuse it with

Rule 9A and Rule 9B are siblings. Rule 9A, in force since 2019, made dematerialisation mandatory for unlisted public companies. Rule 9B, from October 2023, extends the same discipline to private companies that are not small companies. Section 29 of the Companies Act is the parent provision that empowers demat requirements, and the public-company penalties under Section 29 read with Rule 9A are the enforcement precedent that private companies should read as a warning.

Form PAS-6 is also confused with the annual return in Form MGT-7. They are different filings: MGT-7 is the yearly annual return, while PAS-6 is the half-yearly reconciliation of share capital that only demat-covered companies file. Finally, dematerialisation is not the same as rematerialisation. Demat converts physical certificates into electronic form; remat is the reverse, converting electronic holdings back to physical, which Rule 9B effectively closes off for covered private companies because fresh issues can only be electronic.

Sources and references

• Companies (Prospectus and Allotment of Securities) Rules, 2014 (Rule 9B). Source: India Code, indiacode.nic.in
• Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023, notified 27 October 2023. Source: Ministry of Corporate Affairs, mca.gov.in
• Section 450 and Section 29, Companies Act, 2013, India Code
• Depositories Act, 1996, India Code
• “Mandatory Dematerialization of Securities of Private Companies: Understanding Rule 9B”, IBC Laws
• “From Physical to Digital: Rule 9B and the Dematerialization of Securities of Private Companies”, MMJC
• Biogenomics Limited and KCP Infra Limited adjudication (Section 29 r/w Rule 9A), MCA order via TaxGuru

Frequently asked questions

What is Rule 9B dematerialisation for private companies?

Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014, inserted on 27 October 2023, requires every private company that is not a small company to issue securities only in dematerialised form and to convert all existing physical shares into demat form. Small companies and government companies are exempt. A company that is non-small as per its audited FY 2024-25 accounts must comply by 30 September 2026, which is eighteen months from the close of that financial year. The obligation covers all classes of securities, not only equity shares.

What is the Rule 9B deadline for private companies in 2026?

A private company that becomes non-small based on its audited financial statements for the year ended 31 March 2025 must complete dematerialisation within eighteen months of that year end, so on or before 30 September 2026. Companies that were already non-small as per FY 2023-24 accounts had an earlier deadline of 30 September 2025 and are late if they have not complied. Producer companies have until 31 March 2028. Because small-company status is retested each year, the demat deadline is a rolling one tied to the year you first cross the threshold.

What is the penalty for missing the Rule 9B demat deadline?

Rule 9B carries no separate penalty, so Section 450 of the Companies Act, 2013 applies: ₹10,000 on the company and on every officer in default, plus ₹1,000 for each day the default continues, capped at ₹2,00,000 for the company and ₹50,000 per officer. The larger cost is commercial. A non-compliant company cannot make any further issue of securities, cannot buy back shares, and cannot complete a bonus or rights issue, and physical shareholders cannot transfer their shares. MCA has already penalised Biogenomics Limited ₹31.83 lakh under the public-company version of the demat rule.

Do startups need to follow Rule 9B before raising funds?

Yes, if the startup is a private company that is not a small company. Once Rule 9B applies, the company cannot allot new securities unless the entire holding of its promoters, directors and Key Managerial Personnel is already in demat form and an ISIN is in place. A priced round, a CCPS issue or an ESOP allotment cannot be completed on the MCA portal until the company is compliant, so the demat exercise sits on the critical path of the next round. Investor diligence routinely checks for it, and a gap can delay or reprice a deal.

What is Form PAS-6 and when is it due?

Form PAS-6 is the half-yearly Reconciliation of Share Capital Audit Report that every company covered by demat rules files with the Registrar. It is due within sixty days of the end of each half year and is certified by a company secretary or chartered accountant in practice. For a company brought under Rule 9B, the filing for the half year ending 30 September 2026 falls due by 29 November 2026, and the half year ending 31 March falls due by 30 May. PAS-6 is a standing obligation, so it must sit on the compliance calendar every May and November.

Is a small company covered by Rule 9B?

No. A small company as defined under Section 2(85) of the Companies Act, 2013 is expressly excluded from Rule 9B, and so are government companies. Small-company status is tested each financial year against the paid-up capital and turnover thresholds. A company that crosses those thresholds and becomes non-small in any year ending on or after 31 March 2023 is pulled into Rule 9B and gets eighteen months from that year end to comply. This is why a company that was exempt last year can find itself on the 30 September 2026 deadline this year.

How long does dematerialisation take for a private company?

The company-level steps, from board approval to obtaining an ISIN through an RTA and a depository, usually take four to eight weeks, and ISIN allotment can be slow when depositories are clearing a high volume of applications. Getting every shareholder to open a demat account and surrender physical certificates adds further time. With the 30 September 2026 deadline about seven weeks out from mid-August 2026, a company that has not started should begin the RTA and ISIN process immediately rather than assume it can be done in the final fortnight.

Last updated: 11 August 2026. This article is general information on Rule 9B dematerialisation for private companies and not a substitute for professional advice on your company’s specific facts.