Enhanced Transparency Dealing in Corporate Securities Demat of Securities by Other than Small Companies


A private Company has been enjoying 16 exemptions from certain provisions of the Companies Act 2013 granted by the Central Government under the Notifications dated 05.06.2015 as amended by Notification No. G.S.R. 583(E) dated: 13.06.2017. Private Companies, unlike public Companies, were so far allowed to have their Securities in physical mode The Private Company have been issue The Ministry of Corporate Affairs has recently issued a Notification effective from 27.10.2023 by way of amendment of rules called The Companies (Prospectus and Allotment of Securities) Second Amendment Rules 2023. Rule 9B namely Issue of Securities in dematerialized form by Private Companies – The amended rule requires the Private Companies other than small company to demat their shares within a period of 18 months from 31.03.2023

Small Companies

Section 2(85) of the Companies Act 2013 defines the term Small Company means a Company other than a Public Company

Paid up Capital

Paid-up share capital of which does not exceed Rs Rs 50 Lacs or such higher amount as may be prescribed which shall not be more than RS 10 Cr *
Turnover Turnover of which company as per profit and loss account for the immediately preceding financial year does not exceed Rs 2 Cr or such higher amount as may be prescribed which shall not be more than Rs 100 Cr *
· Companies Amendment Act 2017with effect from 09.02.2018

Section 2(85) does not apply to

1. A holding Company or a subsidiary company

2. A Company registered under Section 8 Company
3. A Company or body corporate governed by any Special Act

Date of Reckon

A private Company is required to check with its last audited Financial Statement for the Year ended on or after 31.03.2023 and ascertain whether its paid capital is Rs 10 Cr or more and its turnover has been more than Rs 100 Cr and in such case it would fall outside the category of the definition of a small company

Timeline for dematerialization

Such a Company shall be required to comply with the provision of Rules 9B within 18 months of the closure of such FY Those of the Companies covered on 31.03.2023 is required to demat the shares on or before 30.09.2024

Company to Demat and facilitate its securities

Every private company other than a small company shall be required to comply with the provisions of the Depositories Act 1996 and regulations made thereunder while (a) issue the Securities only in Dematerialized form and (b) facilitating dematerialization of all its securities within the time of 18 months from reckoned with the closure of the financial year

Promoter Director and KMP securities to be Dematerialized

Any offer for the issue of any securities or buyback of securities or issue of bonus shares or rights offer after the date when the company is required to comply with rule 9B every company shall ensure prior to making of such offer that the entire holding of securities of its promoters Directors Key Managerial Personnel be dematerialized as per the provision of Depositories Act 1996 and regulations made thereunder

Provision not apply: Provisions of Rule 9 B shall not apply to a Government Company

Application of Rule 9A: Provision of Rule 9A (4) to (10) shall mutatis mutandis apply to the Dematerialization of securities under Rule 9 B


Co to secure International Security Identification Number for each of the security
9(5) Pay fees to the depository and Registrar to the issue and share the transfer agent and maintain security deposit at all times with the Depository and Registrar to the issue and share transfer agent and comply with Regulations of the Depository from time to time
9(6) Company not to offer any securities /buy back / bonus/rights when the fees to Depository is under default
9(7) Provision of Depository Act apply for Demat of securities of unlisted public cos
9(8) Within 60 days of the conclusion of each half year unlisted public co to file a form PAS 6 with fees to the Registrar of Companies duly certified by practicing CA /CS

The Co to bring it to the notice of the depository any difference observed in issued capital and the capital held in Demat

9(9) Grievances of security holders if any of unlisted public co shall be filed before Investor Education and Protection Fund Authority
9(10) IEPFA shall initiate any action against the depository or Registrar to an issue and share transfer agent after prior consent with SEBI

Rule 9 B Issue of Securities IN DEMATERIALISED form by Private Companies

This rule 9B has been inserted after 9A and it applies to every private company -Other than a small company this rule would be applicable from 27.10.2023

Issue the Securities

ONLY in dematerialized form
Facilitate Dematerialization of all its securities
In accordance with -Act and Regulations Provisions of Depositories Act 1996

Applicable to

Not a small Company

A private Company – on or after 31.03.2023 is not a small company as per audited FS for such FY
Co shall comply within Such Co shall comply with the provision of Rule 9 B within 18 months from the closure of the such FY namely 30.09.2024
Comply with Act /Regulations of Entire Holding to be Demat Provisions of Depositories Act 1996

The Co shall ensure that before making such an offer entire holding of securities of its promoters – directors – Key Managerial Personnel – has been dematerialized – as per the Depositories Act 1996 and the regulations thereof

For any event after 30.09.2024

issue of any securities Or

Buy Back Or

Issue of Bonus shares Or

Rights shares

Holder of Securities of the private co Transfer

Intends to transfer any of such securities on or after the date (30.09.2024) is required to get his securities DEMATERIALISED before the Transfer

Holder of securities of the private co


Private placement




To any securities of the Concerned private company whether by way of private placement or bonus or rights offer on or after 30.09.2024 is required to ensure that all his securities are held in demat form before such subscription

Government Company

Rule 9B(5) the provisions of this rule does not apply to a Government Company
Mutatis Mutandis Sub rule 9A( 4 to 10) apply to Demat of securities under this rule 9 B

Summarizing those of the eligible private companies are required to take steps to get all its securities Dematerialized within 18 months time from the end of the financial year on or after 31.03.2023 and also ensure that the securities held by its promoters Directors and Key Managerial Personnel are dematerialized prior to any steps for the issue of any kind of securities upon applicable of this rule 9B Its important to note even the issue of bonuses or rights issue of securities can be undertaken only upon ensuring that the securities are dematerialized The compliance would result in increased cost in terms of periodical fees to depository and share transfer agent and filing fee and certification fee for PAS 6 forms The flip side of this rule 9B would essentially curtail undesirable practices such as backdating transfer or rights issue etc and ensure enhanced measure of transparency in corporate records relating to Securities This measure to a large extent would go reduce the potential litigations surrounding securities of fairly large private companies

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Qualification: FCS FCMA BL
Location: Chennai, Tamil Nadu, India
Member Since: 14 Nov 2023 | Total Posts: 3

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February 2024