Dematerialisation of Shares for Private Companies

Q: Which private companies are required to dematerialise shares?

All private companies other than small companies (paid-up capital ≤ ₹4 crore, turnover ≤ ₹40 crore) must dematerialise shares effective 30 September 2024 under Rule 9B.

Q: What is an ISIN and how is it obtained?

An ISIN is a 12-character code identifying a company's securities. It is obtained by appointing an RTA, signing a tripartite agreement with a depository (NSDL/CDSL), and submitting the ISIN application.

Q: Can a shareholder refuse to dematerialise their shares?

Shareholders cannot legally refuse, but the company cannot forcibly demat shares. The company must document facilitation efforts and seek legal advice for non-compliant shareholders.

Q: What happens to share transfers after the demat deadline?

After 30 September 2024, no transfer of shares can be registered unless shares are held in demat form by both parties. Physical transfer deeds are no longer valid.

Q: How long does the dematerialisation process take?

The process typically takes 4 to 8 weeks, covering RTA appointment, ISIN allocation, and individual shareholder demat request processing.

Complete Guide to Mandatory Demat of Shares Under Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014

Dematerialisation (demat) of shares is the process of converting physical share certificates into electronic form held in a Depository Account with NSDL or CDSL. While demat has been mandatory for listed companies for decades, the Ministry of Corporate Affairs extended this requirement to private limited companies through an amendment effective 30 September 2024 — requiring all private companies (other than small companies) to dematerialise their existing shares and issue new shares only in demat form.

The dematerialisation process involves appointing a Registrar and Transfer Agent (RTA), entering into an agreement with a depository, filing the ISIN application, and facilitating the conversion of physical share certificates held by each shareholder into demat credits. Our services cover the complete demat compliance process for private companies — from RTA appointment and ISIN procurement to shareholder onboarding and ROC reporting.

Our Dematerialisation Services

RTA Appointment

Assistance with identification and appointment of a SEBI-registered Registrar and Transfer Agent (RTA) — a mandatory prerequisite for private companies seeking to dematerialise their shares.

Depository Agreement & ISIN

Facilitation of the agreement between the company and a depository (NSDL or CDSL) and procurement of a unique International Securities Identification Number (ISIN) for the company's shares.

Shareholder Demat Account Facilitation

Coordination with shareholders who do not have a demat account to open one with a Depository Participant (DP), and assistance with submission of Demat Request Forms (DRF) for conversion of physical certificates.

Physical Certificate Surrender

End-to-end management of the physical share certificate surrender process — including DRF preparation, certificate defacement, despatch to RTA, and tracking of demat credit to shareholder accounts.

PAS-3 & MCA Compliance

Updating of the company's Register of Members to reflect demat holdings and filing of any required intimations or forms with the ROC arising from the dematerialisation process.

New Share Allotment in Demat

Assistance with issuance of new shares directly in demat form after the ISIN is in place — covering PAS-3 filing, corporate action intimation to depository, and demat credit confirmation.

Key Facts About Dematerialisation of Shares

Mandatory demat applies to all private companies other than small companies — effective 30 September 2024 under Rule 9B
After the deadline, a private company cannot make any new allotment, transfer, or buyback of shares unless they are in demat form
Every company must appoint a SEBI-registered RTA and enter into an agreement with NSDL or CDSL before applying for an ISIN
Shareholders who hold physical certificates must open a demat account with any SEBI-registered Depository Participant to participate in the dematerialisation
The company must ensure its shares are admitted to the depository and an ISIN is allocated before any corporate action involving shares
Non-compliance with Rule 9B attracts penalties under Section 450 of the Companies Act, 2013 — applicable to the company and officers in default
Small companies (as defined under Section 2(85)) are currently exempt from mandatory dematerialisation under Rule 9B

Frequently Asked Questions

Which private companies are required to dematerialise shares?

All private limited companies incorporated in India — other than small companies — are required to dematerialise their existing shares and ensure future allotments are made only in demat form, effective 30 September 2024. A small company is one with paid-up capital not exceeding ₹4 crore and turnover not exceeding ₹40 crore. Companies that cease to qualify as small companies must complete dematerialisation within 18 months of losing small company status.

What is an ISIN and how is it obtained?

An ISIN (International Securities Identification Number) is a 12-character alphanumeric code that uniquely identifies a company's securities for the purpose of electronic trading and settlement. For a private company, the ISIN is required to admit shares to a depository (NSDL or CDSL). The company first appoints an RTA and signs a tripartite agreement with the RTA and the depository, after which the ISIN application is submitted. NSDL or CDSL allocates the ISIN, enabling shareholders to hold the company's shares in their demat accounts.

Can a shareholder refuse to dematerialise their shares?

Under the mandatory demat rules, shareholders cannot refuse to dematerialise — the company is prohibited from recognising any transfer, buyback, or new allotment in physical form after the applicable deadline. However, if a shareholder does not have a demat account and refuses to open one, the company cannot forcibly demat their shares. In such cases, the company should document its efforts to facilitate the shareholder's demat compliance and seek legal advice on the consequences for corporate actions involving that shareholder's holding.

What happens to share transfers after the demat deadline?

After 30 September 2024, private companies (other than small companies) cannot register any transfer of shares unless the shares are held in demat form by both the transferor and the transferee. Transferors holding physical certificates must first dematerialise their shares before the transfer can be recorded. The company is prohibited from accepting physical share transfer deeds for registration after the deadline. Any transfer registered in violation of this rule is void.

How long does the dematerialisation process take?

The complete dematerialisation process for a private company typically takes 4 to 8 weeks, depending on the depository, the RTA, and how quickly shareholders submit their Demat Request Forms. Key steps include RTA appointment (1–2 weeks), ISIN application and allocation (2–3 weeks), and individual shareholder demat request processing (1–2 weeks per shareholder after DRF submission). Companies with multiple shareholders or complex share capital structures may require additional time for coordination.

Dematerialise Your Shares — Stay Compliant Under Rule 9B

End-to-end demat compliance support for private companies — RTA appointment, ISIN procurement, and shareholder onboarding.