If you have shares in physical form and wish to transfer them after 1st April 2019, you may not be able to do so. According to a notification by the Securities and Exchange Board of India (Sebi) in June this year, you can hold shares in the physical form after April 1, 2019, but cannot transfer these securities unless they are in the demat form.
Paper share certificates are an anachronism in these days of electronic trading and the Internet. Today, most shares are in dematerialized form, that is, in electronic form. There are no paper certificates, and your shares are held in what is called a demat account, keeping a record of the shares you own. All demat accounts in India are maintained by two authorities — the National Securities Depository Limited (NSDL) and the Central Depository Services Limited (CDSL).
It’s estimated that a little over 2% of shares are still held in paper form. If you still have physical share certificates lying in a cupboard somewhere, it’s time to dust them out and convert them in to dematerialized form. Why, you may ask? In a bid to bring in more transparency in shareholding of companies and to prevent frauds, Sebi has made it mandatory to transfer shares only in demat form from April 1. However, this does not mean that you cannot hold shares in the physical form, but you cannot transfer them, which can affect their value.
Here’s what you need to convert your physical shares into demat form.
Step 1: Open a demat account
The first step is to open a demat account. This can be done by a depository participant (DP), which could be your bank or your stockbroker. You need to fill a form and submit copies of proof of address and identity documents (PAN card, Aadhar card, passport), along with a passport-size photograph.
After processing the document, the DP will open a demat account in your name, with an account number of your own. The demat account is just like a bank account, keeping a record of your shares instead of money.
Some brokers allow you to open a demat account online. To do this, you have tosubmit scanned copies of the required documents. An in-person verification will be done using online video chat.
Step 2: Surrender the share certificates
After opening the DP account, you need to surrender the physical certificates to the DP along with a Dematerialisation request form (DRF). You should use separate DRFs for securities of different companies.
Before you submit the certificates, you must deface them by writing “SURRENDERED FOR DEMATERIALISATION” on the certificates. The DP will then verify that all the details in the form are correct, like the number of certificates, securities, type and so on. After that it will issue an acknowledgement slip to you.
Here are some of the things you may have tofill up on the DRF:
- DP-ID (ID issued to you by your depository participant)
- Account number
- Choose physical certificate or option letter surrendered
- Account Holder Name
- The number of securities to be dematerialized
- Name of the security (as it is on the certificate)
- The face value of the security
- Type of security (equity or debenture or any other)
- Folio number, certificate number and distinctive number
- Total number of shares surrendered
Step 3: Wait for credit of shares to your demat account
After you submit the DRF and share certificates, the depository participant will send the certificate, form and covering letter to the issuer or R&T (registrar and transfer) agent. If everything is in order, the issuer or R&T agent will accept the dematerialisation request in his system and forward it to the National Securities Depository Ltd (NSDL), the central securities depository. The depository module of the NSDL will then authorize the creation of appropriate credit balances in your account for the surrendered shares. After that, you can check your demat account if everything is in order.
Can your request for demat be denied?
In certain cases, the DP may not accept your request for dematerialisation. These instances include:
- If the share certificates are mutilated, and the information is not easily readable. In this case, you may have to send the certificates to the issuer/ R&T agent and get new ones
- If you use a single DRF to dematerialise securities of more than one company
- If you use a single DRF for fully paid-up and partly paid-up securities
Click here if you want help converting your physical certificates to demat.