Dematerialized Shares

Dematerialized Shares

Transfer of shares in a physical form is not possible now.  What is the new ruling?

  1. A Share in a physical form can b e transferred to anyone only if it is in a Demat form wef 1st April 2019.
  2. Securities and Exchange Board of India (SEBI) has brought out the ruling that apart from transmission of securities want for effecting transfer of securities will not be processed unless they are held in a Dematerialized or Demat form, with a depository.
  3. Further, the ruling adds and defines the following:
    1. Transmission means transfer of title of share by way of inheritance and succession.
    2. Transposition means re-arrangement or interchanging of the order of name of shareholders.
  4. Also, SEBI adds that holding the securities in a Physical form is not prohibited even from 1st April 2019, but can be transferred only after they are dematerialised.
  5. If transfer deed is lodged prior to the deadline and returned due to any lacunae in the document, the same can be re-lodged for transfer even after the deadline.

What is required to be done?

A non-traded security cannot be converted into Demat form and only active shares which are traded can only be converted.  Here are the steps involved in this activity.

  1. Open a Demat account which is possible only through a platform which is like opening a bank account.
  2. KYC compliance like PAN card and bank details, for opening a Demat account is compulsory.
  3. Convert the physical share certificates to Demat shares
  4. If the certificates are of the same company, in a single form we can submit upto four share certificates and submit separate sets of DRFs (Dematerialised Request form).
  5. Sign the form and submit the original with a photocopy of PAN.
  6. The DRF is given to a depository participant with all the documents with physical share certificates
  7. This is sent to a registrar and transfer agents to convert the same to electronic form.

Costs and Processes:

  • Normally the annual fee ranges between Rs.s 200 and Rs. 850 which again depends on channels such as banks, stock broking companies, discount broker and online portals.
  • One should check the account opening fee and charges for every transaction which again depends on the channel.
  • Some people waive off the annual maintenance charges in case you do a transaction for a particular sum.
  • Converting physical share to demat form can cost around Rs. 150- Rs. 400 per certificate.
  • Either this can be done directly or through online platforms.
  • Though the process may vary for different companies, the completion of the process may take around 21 days.

In finance and financial law, dematerialization refers to the substitution of paper- form securities by book-entry securities.

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