QUERY RULE 9B-DEMATERIALIZATION OF SHARES OF PRIVATE LIMITED COMPANY

[CA Rahul Srivastava]

A Subsidiary of a foreign company incorporated on Sep 2024.

ISIN alloted in March 2025

There is a delay in opening of DEMAT due to Documentation issue.

Can we allotment shares now in physical form and get them dematerialised by Sep 30, 2026. As per Rule 9B(2) ,  A private company, which as on last day of a financial year, ending on or after 31st March, 2023, is not a small company as per audited financial statements for such financial year, shall, within eighteen months of closure of such financial year, comply with the provisions of this rule. As per my understanding, i can still issue physical shares and get them dematerialised by September 30, 2026.

[Paresh Shah]

In my opinion also

 (see 
https://www.mmjc.in/from-physical-to-digital-rule-9b-and-the-dematerialization-of-securities-of-private-companies/ )

18 month period does not apply to fresh issue of securities.

The best way out is to allot the securities but only credit them to say a trust account and thereafter once demat account is opened by the shareholder to credit them to their demat account. This was the procedure followed by RIL at the time of demerger of Jio Finance Ltd in case of shareholders who had not yet opened demat accounts.

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[CA Rajesh Sewlani]

There is another related question to this topic;

A private company, which as on the last day of a financial year, ending on or after 31st March, 2023, is not a small company as per audited financial statements for such financial year, shall, within eighteen months of closure of such financial year, comply with the provisions of this rule.

one company -

March 2023 - turnover is Rs. 30 crore - so it is other than a small company and was required to get the shares in DEMAT within 18 months i.e. before March 2025.

March 2024 - turnover is Rs. 35 crore (turnover limit got increased to 40 crore in March 2024) - so it's a SMALL COMPANY and not required to get shares in DEMAT

March 2025 - turnover is Rs. 24 crore (small company as per definition)  - not required to get shares in DEMAT

during intervening period - company became small company due to increase in turnover limit from Rs. 20 crore to Rs. 40 Crore

The question is TURNOVER LIMIT of March 2023 to be checked for demat or March 2024.

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Regards,

CA Rajesh Sewlani

 Chartered Accountants

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[CA Rahul Srivastava]

Thanks for your reply . If we go by Rule 9B(3) as below, and if we go through the words highlighted in bold italics, doest it mean the date mentioned there is September 30, 2026 considering the first financial year of the company end on March 31, 2025.

(3) Every private company referred to in sub-rule (2) making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer, after the date when it is required to comply with this rule, shall ensure that before making such offer, entire holding of securities of its promoters, directors, key managerial personnel has been dematerialised in accordance with the provisions of the Depositories Act, 1996 (22 of 1996) and regulations made thereunder.

To view this discussion visit https://groups.google.com/d/msgid/gyan-gurukul-cs-divesh-goyal/1678034527.3636176.1762170275008%40mail.yahoo.com.

[Paresh Shah]

Strictly speaking, the date on which the company is required to comply with the rule is EOD 31 Mar 2025, and it is required to comply latest within 18 months. Theoretically, the company could comply on 1st April 2025 itself, indeed as per your query the company has proactively obtained ISIN in March 2025.

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On Mon, 3 Nov 2025 at 19:48, CA Rahul Srivastava

<carahuls...@gmail.com> wrote:

https://groups.google.com/d/msgid/gyan-gurukul-cs-divesh-goyal/CACh5YZ6-_j8J%2BMqoUn976q1qehmFtmnGpW2ekezZgZXuzQ0nxw%40mail.gmail.com

.

[CA Rahul Srivastava]

Agreed. But since DEMAT is taking time and Company needed funds for expansion, i am exploring if we can go with physical issue of shares.

To view this discussion visit https://groups.google.com/d/msgid/gyan-gurukul-cs-divesh-goyal/230014475.3684067.1762180135071%40mail.yahoo.com.

[Paresh Shah]

I see the difficulty, but issue of physical share certificates is in my opinion prohibited.

Opinion of Shri Divesh Goyal would be greatly appreciated.

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On Mon, 3 Nov 2025 at 20:00, CA Rahul Srivastava

<carahuls...@gmail.com> wrote:

https://groups.google.com/d/msgid/gyan-gurukul-cs-divesh-goyal/CACh5YZ7L%3DjEeQR3xbN2f_r3c2BgxpuZpDJLinT7X9cgD29vVxg%40mail.gmail.com

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