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Demat of Physical Share Certificate – What Does It Mean?
Demat of Physical Share Certificate means converting your old paper-based share certificates into electronic format. This process is also called the Dematerialization of Shares, where physical certificates are destroyed and replaced by electronic records.
Earlier, shares were issued in physical share certificate form (paper format). But now, as per SEBI (Securities and Exchange Board of India), all shares must be held and transferred only in Demat (Dematerialized) form.
Benefits of Demat of Physical Share Certificate
Here are some of the benefits of demat:
- Easy Trading: No need to carry physical papers. Trade shares online with just a few clicks.
- More Secure: Shares are stored safely in a digital vault.
- Full Convenience: Access from anywhere, using the internet and logging in.
- Faster Process: No delays in delivery, transfer, or verification.
- Reduced Cost: No stamp duty on transfer and lower handling charges.
What is DEMAT?
DEMAT = Dematerialization
This is a digital process where:
- Physical share certificates are converted
- Into electronic shares
- Which are then stored safely in your Demat account
You can easily check, transfer, or sell them online anytime.
Why is the Demat of Physical Share Certificate Necessary?
There are several strong reasons to convert your physical shares to demat:
- SEBI rules from 2023 disallow physical share transfers
- No risk of loss, theft, or damage
- Fast and secure online trading
- Eliminates fake or duplicate certificates
- Paperless and environment-friendly process
Who Can Convert Physical Share Certificates to Demat?
Any individual or entity can Convert Physical Shares to Demat if they hold physical share certificates. This process, commonly known as Convert Physical Shares to Demat, helps simplify ownership and allow easy trading.
Almost everyone who holds physical share certificates can start the dematerialization of the share certificates process. Here’s who:
- Individual Investors: Anyone who holds paper share certificates can convert them easily.
- Companies & Corporates: For cleaning up old records and smooth operations.
- Trusts & Institutions: Useful for schools, NGOs, and societies managing old investments.
- Joint Holders: All joint holders need to sign the request to match the ownership.
- Minors: The guardian of the minor can complete the process.
Foreign Investors: Overseas shareholders can also use physical shares to demat services.
Step-by-Step: How to Convert Physical Share Certificates to Demat
Follow this simple process to convert your physical shares to demat:
- Open a Demat Account: Choose a DP (Depository Participant) registered with NSDL or CDSL.
- Collect DRF Form: Ask your DP for a Dematerialization Request Form (DRF).
- Fill DRF Form: Complete it carefully with all the required details.
- Attach Original Share Certificates: Include the actual physical share certificates with the form.
- Submit to Your DP: Submit all documents to your DP for processing.
- Verification & Approval: Your DP sends the request to the company’s registrar for verification.
- Electronic Credit: Once approved, your shares will be credited to your Demat account.
Documents Needed for Demat of Physical Share Certificate
The following steps will guide you on how to Convert Physical Shares to Demat easily and safely.
- Original physical share certificates
- Filled DRF Form
- PAN Card (Copy)
- Aadhaar Card (Copy)
- Passport-size photo
- Cancelled cheque (bank proof)
Time Taken for Physical Shares to Demat Conversion
What Happens After Submission?
After you submit the request:
- The IEPF Form 5 and documents go to the company and IEPF Authority.
- They verify everything.
- If all details are correct, your shares are credited in your Demat account.
- Any unclaimed dividends linked to those shares go to your bank account.
So, it’s a complete and clean process.
Difference Between Dematerialization and Re-materialization
While dematerialization refers to the process to Convert Physical Shares to Demat, rematerialization refers to the process of converting electronic shares back to physical certificates. You can choose to rematerialize your Unpaid Dividends / shares at any time, which takes 30 days. Rematerialized shares, on the other hand, are illiquid because they cannot be traded. It is critical to understand the distinction between dematerialization and rematerialization when learning How to Convert Physical Shares to Demat online.
- Dematerialization of Shares has distinct ISINs, whereas rematerialized shares have unique numbers.
- Depositories keep track of dematerialized shares, while companies keep track of rematerialized shares.
Documents Required For Dematerialization
By physically holding the share certificates, you become a part-owner of the company that issued the shares in the first place. However, converting Demat of Physical Share Certificate necessitates the submission of certain documents to open a Demat account and then file a request to dematerialize share certificates. The following documents are required for Converting Physical Shares into Electronic Form in India:
- Identity proof with a photo, such as your Aadhaar card, PAN card, voter ID card, driving license, and so on are required for Process of Converting Physical Shares into Demat.
- Provide proof of residency, such as registered lease agreements, driver's licenses, passports, landline phone bills, electricity bills, apartment maintenance bills (if applicable), copies of insurance, gas bills, and so on.
- Dematerialization Request Form duly completed. You must ensure that you use separate forms for different companies' shares. For example, if you own 5 shares of XYZ and 5 shares of PQR, two separate forms will be filled out for each company.
- Each paper share in the physical share certificates must be defaced with the words 'Surrendered for Dematerialization'. Remember to obtain an acknowledgment slip for the shares you have surrendered.
Frequently Asked Questions
The process of Dematerialization of Shares involves converting an investor’s physical certificates into an equivalent number of securities in electronic form and crediting those securities to the BO’s account with his DP.
One must complete a DRF (Demat Request Form) that is provided with the DP and submit it along with the physical certificates that are to be dematerialized in order to dematerialize physical securities. For each ISIN, a separate DRF must be filled out.
People often ask about How to Convert Physical Shares to Demat, here the following describes the entire process of Convert Physical Shares to Demat:
- Deliver dematerialization certifications to your DP.
- Through the system, DP notifies the Depository of the request.
- The certificates are delivered by DP to the issuer company’s registrar.
- The dematerialization request from the depository is confirmed by the registrar.
- Following the dematerialization of the certificates, the Registrar changes accounts and notifies the depository that the process is complete.
- Depository informs the DP and adjusts its accounts.
- The investor’s demat account is updated by DP.
A security is assigned a 12-digit alphanumeric identifying number called an ISIN (International Securities identifying Number), for example, INE383C01018. differing ISIN’s will be assigned to equities issued by the same issuer that is fully paid up, partially paid up, or that has differing voting or dividend rights.
A)Scenario 1:
If you already have a Demat of Physical Share Certificate, you can contact your depository participant (bank or broker), complete the DRF form that is provided by the DP, affix your actual share certificates to it, and then send it to the DP.
B)Scenario 2:
If you don’t already have one, you can open one at any Depository Participant (Bank/Broker) of your choice for Transfer of Shares. You can also look for the depository participant service centers in your area by visiting our website.
A)Scenario 1:
If you already have a Demat of Physical Share Certificate, you can contact your depository participant (bank or broker), complete the DRF form that is provided by the DP, affix your actual share certificates to it, and then send it to the DP.
B)Scenario 2:
If you don’t already have one, you can open one at any Depository Participant (Bank/Broker) of your choice for Transfer of Shares. You can also look for the depository participant service centers in your area by visiting our website.
The SEBI standards state that the Process of Converting Physical Shares into Demat should take about 21 days to complete; however, it may take longer for some companies. With your DP, you can determine the status of Converting Physical Shares into Electronic Form.
After April 1, 2019, you won’t be allowed to sell or Transmission of Shares in this situation. Before you may sell or transfer shares, you must wait for their demat. However, if you choose to, you may keep holding your shares in tangible form.