By Adv. Siddhant Jain
As a corporate lawyers, I have closely advised private companies, investors, and founders on navigating complex regulatory changes. The recent June 30, 2025 deadline for dematerialisation of shares under Rule 9B is not just a procedural milestone—it marks a decisive shift in how private companies manage ownership, compliance, and shareholder rights. In this note, I break down the real-world consequences of missing the deadline, the legal exposures companies now face, and the practical steps you can take to cure non-compliance without delay.
The June 30, 2025 deadline for dematerialising securities under Rule 9B has now passed. Any private company (other than exempt small and producer companies) that has not completed dematerialisation is exposed to immediate regulatory restrictions, monetary penalties and operational disruption. Having advised and guided private companies through dematerialisation and remediation, I set out below the concrete consequences, the practical steps to cure non-compliance, and a short, tactical checklist you must act on now.
Why this matters — practical and legal impacts
The MCA’s mandate to convert physical share certificates into electronic (Demat) form is not a clerical nicety — it is a structural change to how ownership is recorded and how companies can run capital-market related corporate actions. Missing the deadline does more than invite a fine: it freezes key corporate functions and undermines shareholder rights and market confidence.
Immediate business consequences
- No fresh issue or allotment of securities. The company will be barred from issuing bonus shares, making rights issues, allotting shares or executing buybacks until dematerialisation compliance is restored.
- Share capital restructuring blocked. Any corporate action that affects share capital (e.g., subdivisions, consolidations, conversion of securities) cannot proceed.
- Liquidity and transfer paralysis for shareholders. Holders of physical certificates cannot transfer, sell, or otherwise deal in those shares on the basis of the physical documents alone — they will be unable to participate in market transactions or corporate actions tied to electronic holdings.
- Operational friction and reputational damage. Delays in dividend crediting, inability to record beneficial ownership correctly, and the administrative burden of urgent remediation create client and investor unease.
Regulatory and monetary consequences
- Officers in default: an initial penalty of ₹10,000 and a continuing penalty of ₹1,000 per day, capped at ₹2,00,000 — exposure attaches to directors and other officers in default until compliance is restored.
- Company penalty: up to ₹50,000.
These penalties exist to ensure managerial accountability and to incentivise timely compliance; they can be avoided only by completing the dematerialisation process.
Who must comply — and the important caveats
- Applies to: All private companies except those explicitly exempted (small companies and producer companies).
- Exemptions: Small companies (paid-up capital ≤ ₹4 crore and turnover ≤ ₹40 crore) and producer companies.
- Important caveat: An otherwise exempt company must comply if it acts as a holding company or a subsidiary of another corporate entity that is not exempt. Check your corporate structure carefully — group relationships can eliminate exemptions.
How to cure non-compliance — a practitioner’s roadmap
From my experience, companies that move systematically resolve issues quickly. The pragmatic steps are:
- Identify outstanding physical certificates and reconcile the cap table.
- Cross-check shareholder names, folio numbers, certificate numbers and distinct demographic details (PAN, KYC).
- Engage a Depository Participant (DP) and your Registrar & Transfer Agent (RTA) immediately.
- Open the Demat account of Shareholders with a DP (bank, broker or financial institution).
- Submit Demat Request Form (DRF) and supporting records to the DP/RTA.
- Ensure certificates are clear of discrepancies; correct signature(s) and KYC mismatches first.
- Obtain a Dematerialisation Request Number (DRN) from the DP — track this until the RTA/DP confirms cancellation of physical certificates.
- Confirm credit of electronic securities to the Demat account of Shareholder and update the statutory registers and filings.
- File any remediating disclosures as required with the MCA/RTA (if the company has already received notices or show-cause communications, respond promptly).
Practical tip: reconciliation errors (name mismatches, incomplete KYC, joint holder signature issues) are the most frequent cause of delay. Address these first and keep an audit trail.
Governance and commercial upsides of acting fast
Beyond avoiding fines, converting to Demat form:
- Restores the company’s ability to undertake capital transactions.
- Improves corporate governance and record accuracy.
- Reduces fraud risk associated with physical certificates.
- Enhances investor confidence — an important point if you are raising funds or onboarding new stakeholders.
Closing note from Me
The June 30, 2025 deadline has passed. If your company has not completed dematerialisation, you are exposed today — not hypothetically — to regulatory restrictions and penalties. From the practical matters I have seen on the ground, swift, methodical action resolves most issues within weeks once the reconciliation and KYC obstacles are cleared.
If you would like assistance to assess your company’s position, prepare the required reconciliation, liaise with the DP and RTA, or to draft responses to any regulatory notices, please get in touch:
If you want to dematerialise your company’s shares, email me at siddhantjain2403@gmail.com. For any legal queries or tailored assistance on corporate or commercial matters, you can also book a consultation with me here: “Click Here”.
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Meet Siddhant Jain — a lawyer who thrives in the dynamic world of Business & Commercial Law, Private Client Practice, and Maritime Matters. For him, boardrooms are battlefields, mergers are puzzles, and corporate jargon is a second language. Whether it’s navigating the maze of company law, tackling securities regulations, steering businesses through the stormy seas of bankruptcy and insolvency, or handling complex maritime disputes, Siddhant has done it all.
Beyond the corporate hustle, Siddhant also works closely with private clients — advising on wills, Trust, family settlements, agreements, and bespoke legal strategies to safeguard both business and personal interests.
From drafting intricate legal opinions on mergers to guiding company closures, and from advising shipping stakeholders to assisting families in succession planning, his practice spans a diverse legal spectrum. And when he’s not solving legal riddles, Siddhant shares his insights through newsletters and publications — because why should only his clients benefit from all that knowledge?
If you’re looking for someone who can untangle the knots of business law, safeguard your personal matters, or help you sail through maritime complexities (with a touch of humor along the way), Siddhant’s your guy.
📩 Reach him at siddhantjain2403@gmail.com