MCA Extends Deadline for Mandatory Dematerialization of Shares for Private Companies including Section 8 Company

MCA Extends Deadline for Mandatory Dematerialization of Shares for Private Companies including Section 8 Company. Key Note on Deadlines: MCA Extends Deadline for Dematerialisation of Shares Until 30th June 2025
The Ministry of Corporate Affairs (MCA) has extended the mandatory dematerialisation of Shares deadline under Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014 by MCA notification dated 12th February 2025, private companies that were not classified as small companies as of 31st March 2023 now have until 30th June 2025 to comply with the ISIN & Demat Process requirement for Private Companies under Rule 9B. 
This MCA extension allows companies and shareholders additional time to transition from physical shareholding to electronic format as per the Depositories Act, 1996. During this grace period, even if a company has already obtained an ISIN, shareholders still have the option to hold or transfer their shares in physical form until the deadline under rule 9B(4). However, after 30th June 2025, no further transactions in physical mode will be permitted, meaning all Share transfers, allotments (Increase of Paid-up Capital), and issuances of other Securities  must be conducted in dematerialised form. 
Therefore, companies must check that they facilitate dematerialisation for shareholders, as post-deadline, any shareholder intending to transfer shares or subscribe to new issuances (such as private placements, rights issues, or bonus shares) must first convert their holdings into demat form. Non-compliance beyond the deadline will result in restrictions on share transactions and hefty regulatory penalties under this Rule 9(B).
Other Important Points related to the Rule 9B Provisions and its impacts
Lets understand the other key notes related to the Rule 9B Provisions and its impacts.
MCA’s Rule 9B-Companies (Prospectus and Allotment of Securities) Rules, 2025
 Applicability of Rule 9B: Private companies (excluding small and producer companies) must comply if they had a paid-up capital of Rs.4 crore or more OR turnover of Rs.40 crore or more as of 31st March 2023.

Companies that cross this threshold after March 31, 2023, must comply within 18 months from the financial year-end.

Compliance Requirement for Private Companies
Every private company (other than a small company) must: (a) Issue securities only in dematerialised form; and (b) Facilitate dematerialisation of all its securities as per the Depositories Act, 1996.
Timeline for Compliance
Companies that were not classified as a small company as of 31st March 2023 must comply within:

18 months from the financial year-end for companies crossing the threshold after 31st March 2023.
30th June 2025 for companies covered by the MCA extension 2025.

Latest Amendment (MCA Notification – February 2025)
“Provided further that a private company, other than a producer company, which is not a small company as on 31st March 2023, may comply with the provision of this sub-rule by 30th June 2025.”
Impact on Share Transactions after MCA Extension

Until 30th June 2025, companies can still allot and transfer shares in physical form, even if companies have obtained ISIN but shareholders have not converted their shares into demat as per Rule 9B(4).
Post 30th June 2025, all share allotments and transfers must be conducted in dematerialised form only.

Shareholder’s Option to Transfer in Physical Form Until 30th June 2025

The rule does not mandate shareholders to compulsorily convert their shares into demat before transferring them until the deadline.
Until 30th June 2025, shareholders can continue transferring their shares in physical form if they choose.

Subscriber to New Share Issuance & Demat Requirement

Any subscription to fresh securities (private placement, rights issue, or bonus shares) made on or after the compliance date must be in dematerialised form only.
If an existing shareholder wants to subscribe to newly issued shares post 30th June 2025, they must have a demat account and dematerialise their existing holdings before subscribing.

Can Companies Still Issue & Transfer Physical Shares Until 30th June 2025?

Cases

Can the company allot/transfer shares in physical mode?

Key Points

Scenario 1: Company has obtained ISIN, but shareholders have not converted shares into demat

Yes, the company can continue share allotment and transfer in physical mode until 30th June 2025.

- The mere existence of an ISIN does not restrict physical share transactions before the extended date.
- Companies can still conduct physical transfers and issuances within this grace period while transitioning to a full demat system.

Scenario 2: Company has not yet applied for ISIN

Yes, the company can still issue and transfer shares physically until 30th June 2025.

- The company must obtain ISIN as soon as possible to comply with the dematerialisation mandate.
- Companies should expedite the process to avoid last-minute compliance issues.

Scenario 3: Post 30th June 2025

No, share allotment or transfer in physical mode will not be permitted.

- All transactions must be conducted electronically in demat form as per Rule 9B and the Depositories Act, 1996.
- Companies that fail to comply may face penalties and operational restrictions.

Frequently Asked Questions (FAQs) on ISIN 
Q1: What is dematerialisation of shares?
Ans. Dematerialisation is the process of converting physical share certificates into electronic form, which are then stored in a demat account with a Depository Participant (DP).
Q2: Is dematerialisation mandatory for private companies?
Ans. Yes. As per Rule 9B, private companies must convert existing physical shares into electronic form and issue all future shares in demat mode.
Q3: What is the new deadline for compliance?
 Ans. The MCA has extended the dematerialisation deadline to 30th June 2025 under Rule 9B(2).
Q4: Can a company still issue or transfer shares in physical form before 30th June 2025?
Ans. Yes. If shareholders have not yet converted their shares into demat, the company can still issue and allow transfer shares physically before the deadline under Rule 9B (2 )&(4). 
Q5: Can a company issue physical shares after the deadline?
 Ans. No. After 30th June 2025, all share transactions must be conducted in electronic (demat) form only.
Q6: What is ISIN, and why is it required?
Ans. ISIN (International Securities Identification Number) is a unique identification code for securities. It is mandatory for dematerialisation and is issued by NSDL/CDSL through an RTA.
Q7: What are the penalties for non-compliance?
 Ans. Companies failing to comply will face:

Fines of up to Rs.2,00,000 for the company
Penalties of up to Rs.50,000 for officers in default
Restriction on issuing, transferring, or allotting shares

Q8: What should companies do before the deadline?
Ans. Companies should:

Must check all shareholders complete dematerialisation.
Update company records and AoA to allow electronic shareholding.
File PAS-6 with MCA every six months to report compliance.

Key Note on Deadlines: MCA Extends Deadline for Dematerialisation of Shares Until 30th June 2025

The Ministry of Corporate Affairs (MCA) has extended the mandatory dematerialisation of Shares deadline under Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014 by MCA notification dated 12th February 2025, private companies that were not classified as small companies as of 31st March 2023 now have until 30th June 2025 to comply with the ISIN & Demat Process requirement for Private Companies under Rule 9B.

This MCA extension allows companies and shareholders additional time to transition from physical shareholding to electronic format as per the Depositories Act, 1996. During this grace period, even if a company has already obtained an ISIN, shareholders still have the option to hold or transfer their shares in physical form until the deadline under rule 9B(4). However, after 30th June 2025, no further transactions in physical mode will be permitted, meaning all Share transfers, allotments (Increase of Paid-up Capital), and issuances of other Securities must be conducted in dematerialised form.

Therefore, companies must check that they facilitate dematerialisation for shareholders, as post-deadline, any shareholder intending to transfer shares or subscribe to new issuances (such as private placements, rights issues, or bonus shares) must first convert their holdings into demat form. Non-compliance beyond the deadline will result in restrictions on share transactions and hefty regulatory penalties under this Rule 9(B).

Other Important Points related to the Rule 9B Provisions and its impacts

Lets understand the other key notes related to the Rule 9B Provisions and its impacts.

MCA’s Rule 9B-Companies (Prospectus and Allotment of Securities) Rules, 2025

Applicability of Rule 9B: Private companies (excluding small and producer companies) must comply if they had a paid-up capital of Rs.4 crore or more OR turnover of Rs.40 crore or more as of 31st March 2023.

Companies that cross this threshold after March 31, 2023, must comply within 18 months from the financial year-end.

Compliance Requirement for Private Companies

Every private company (other than a small company) must:
(a) Issue securities only in dematerialised form; and
(b) Facilitate dematerialisation of all its securities as per the Depositories Act, 1996.

Timeline for Compliance

Companies that were not classified as a small company as of 31st March 2023 must comply within:

18 months from the financial year-end for companies crossing the threshold after 31st March 2023.
30th June 2025 for companies covered by the MCA extension 2025.

Latest Amendment (MCA Notification – February 2025)

“Provided further that a private company, other than a producer company, which is not a small company as on 31st March 2023, may comply with the provision of this sub-rule by 30th June 2025.”

Impact on Share Transactions after MCA Extension

Until 30th June 2025, companies can still allot and transfer shares in physical form, even if companies have obtained ISIN but shareholders have not converted their shares into demat as per Rule 9B(4).
Post 30th June 2025, all share allotments and transfers must be conducted in dematerialised form only.

Shareholder’s Option to Transfer in Physical Form Until 30th June 2025

The rule does not mandate shareholders to compulsorily convert their shares into demat before transferring them until the deadline.
Until 30th June 2025, shareholders can continue transferring their shares in physical form if they choose.

Subscriber to New Share Issuance & Demat Requirement

Any subscription to fresh securities (private placement, rights issue, or bonus shares) made on or after the compliance date must be in dematerialised form only.
If an existing shareholder wants to subscribe to newly issued shares post 30th June 2025, they must have a demat account and dematerialise their existing holdings before subscribing.

Can Companies Still Issue & Transfer Physical Shares Until 30th June 2025?

Cases	Can the company allot/transfer shares in physical mode?	Key Points
Scenario 1: Company has obtained ISIN, but shareholders have not converted shares into demat	Yes, the company can continue share allotment and transfer in physical mode until 30th June 2025.	- The mere existence of an ISIN does not restrict physical share transactions before the extended date. - Companies can still conduct physical transfers and issuances within this grace period while transitioning to a full demat system.
Scenario 2: Company has not yet applied for ISIN	Yes, the company can still issue and transfer shares physically until 30th June 2025.	- The company must obtain ISIN as soon as possible to comply with the dematerialisation mandate. - Companies should expedite the process to avoid last-minute compliance issues.
Scenario 3: Post 30th June 2025	No, share allotment or transfer in physical mode will not be permitted.	- All transactions must be conducted electronically in demat form as per Rule 9B and the Depositories Act, 1996. - Companies that fail to comply may face penalties and operational restrictions.

Frequently Asked Questions (FAQs) on ISIN

Q1: What is dematerialisation of shares?

Ans. Dematerialisation is the process of converting physical share certificates into electronic form, which are then stored in a demat account with a Depository Participant (DP).

Q2: Is dematerialisation mandatory for private companies?

Ans. Yes. As per Rule 9B, private companies must convert existing physical shares into electronic form and issue all future shares in demat mode.

Q3: What is the new deadline for compliance?

Ans. The MCA has extended the dematerialisation deadline to 30th June 2025 under Rule 9B(2).

Q4: Can a company still issue or transfer shares in physical form before 30th June 2025?

Ans. Yes. If shareholders have not yet converted their shares into demat, the company can still issue and allow transfer shares physically before the deadline under Rule 9B (2 )&(4).

Q5: Can a company issue physical shares after the deadline?

Ans. No. After 30th June 2025, all share transactions must be conducted in electronic (demat) form only.

Q6: What is ISIN, and why is it required?

Ans. ISIN (International Securities Identification Number) is a unique identification code for securities. It is mandatory for dematerialisation and is issued by NSDL/CDSL through an RTA.

Q7: What are the penalties for non-compliance?

Ans. Companies failing to comply will face: