The Demat Mandate Expansion for Private Companies: What's Live, What's Next, and the Operational Playbook

Dematerialisation of securities was, for years, a listed-company conversation. Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules brought unlisted public companies into the mandatory demat regime in 2018. The 2023 amendment, with Rule 9B, extended it to a broad class of private companies — and the operational deadlines through 2024-25 have now hit. By mid-2026, the operational reality is set. Most CS practices, however, have not yet adjusted their incorporation playbook to reflect this. This article is the catch-up.

Who is in scope now

Under Rule 9B, every private company (other than a small company) is required to:

• Issue all securities in dematerialised form.
• Facilitate dematerialisation of existing securities.
• Comply with the Depositories Act regime — ISIN allotment, RTA appointment, depository agreement.

“Small company” under Section 2(85) currently means paid-up capital up to ₹4 crore and turnover up to ₹40 crore — both thresholds. A company breaching either is outside the small company definition and into the demat mandate.

The operational deadlines

The original Rule 9B set the timeline at 18 months from the end of the financial year in which the company falls within the rule's scope. Practically, the wave has been: companies crossing the small-company threshold in FY24 had to complete demat by 30 September 2025; FY25-threshold companies by 30 September 2026. Companies that crossed the threshold earlier and missed the original deadline have been making catch-up filings through 2024 and 2025.

What changes operationally for an in-scope private company

• ISIN allotment. Apply with CDSL / NSDL through a registered RTA. Three to six weeks typical.
• RTA appointment. Formal engagement with a SEBI-registered RTA. Annual fee structure.
• Depository agreements. Tripartite agreement — company, RTA, depository.
• Conversion of existing physical certificates to demat. All members notified, demat request forms collected, certificates surrendered.
• All future allotments in demat only. PAS-3 references the credited demat account; no physical certificate issued.
• Share transfers in demat only. SH-4 physical transfer regime no longer applicable for in-scope companies.
• Annual reporting. Half-yearly PAS-6 — reconciliation of share capital audit report by a practicing CS to be filed with the ROC.

What this means for new incorporations

If the new company is expected to cross the small-company threshold within 2-3 years, the smart CS move is to demat from day one. The cost differential is small. The retrofit later — particularly for companies with international shareholders whose demat accounts must be opened separately — is materially higher.

The PAS-6 form — the recurring obligation most miss

Half-yearly reconciliation of share capital audit report:

• Filed within 60 days of the end of each half-year (i.e. by 30 May and 29 November typically).
• Audit by a practising CS or CA.
• Reconciles total issued capital with the sum held in demat + physical (if any) — covers any mismatch.
• Late filing attracts the standard MCA additional fee regime.

PAS-6 has been the most consistently missed form in the post-Rule 9B period. The CS who builds it into the half-yearly calendar avoids the additional fees and the audit trail of non-compliance.

The five operational mistakes

1. Treating the deadline as a soft target. Beyond the deadline, the company cannot issue any further securities. The next round of fund-raising is frozen until compliance.
2. Missing foreign shareholder demat setup. NRIs and foreign entities need NRO/repatriable demat accounts respectively; the lead time is meaningful.
3. Cap table / depository reconciliation drift. The depository becomes the system of record; cap table must be reconciled.
4. Forgetting nominee, dormant, or deceased member holdings. These create reconciliation gaps that surface in PAS-6.
5. Not refreshing the AoA. Some pre-2018 AoAs explicitly contemplate physical certificates; AoA amendment may be needed to support demat-only operation.

The strategic angle for founders

Demat changes the texture of a private company in subtle but important ways:

• Vesting and exercise of ESOPs is operationally smoother in demat.
• Cap table due diligence becomes faster — depository confirms holdings.
• Fraud-prone physical share transfers and forged signatures become difficult.
• Convertible instruments converting into equity move into demat automatically.
• Investor exits (secondary sales) are mechanically simpler.

How Delta Filings supports the demat lifecycle

The Delta Filings cap table module integrates with CDSL and NSDL ISIN data, auto-reconciles the company-held register with depository confirmations, and ships a half-yearly PAS-6 draft pre-filled from this reconciliation. For an in-house CS team managing multiple private subsidiaries through the demat conversion wave, the reduction in PAS-6 prep time is the most-cited benefit.

The closing note

The demat mandate is the largest quiet expansion of corporate-securities infrastructure into the private company space in recent Indian history. The companies that have adapted treat it as the operating norm. The ones that have not are gradually being slowed down — by frozen allotments, late PAS-6 filings, and harder due diligence. The good news: the catch-up project is not large. The right time to start is now.