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DEMAT OF PHYSICAL SHARE CERTIFICATE
Dematerialization, or Demat of Physical Share Certificate, is the process of converting physical share certificates into electronic form. This means that the shares are no longer held in paper form, but rather as digital records. Demat is required by the Securities and Exchange Board of India (SEBI) for all share trading through recognized stock exchanges. This is because demat makes it easier to trade shares, as it eliminates the need to physically transport share certificates. It also makes it more secure, as shares are held in a digital vault that is protected by multiple layers of security.
Benefits of Demat of Physical Share Certificate
Here are some of the benefits of demat:
- Ease of trading: Demat makes it easier to trade shares, as you no longer need to physically transport share certificates. You can simply trade shares online or through a broker.
- Security: Demat is more secure than holding physical share certificates, as your shares are held in a digital vault that is protected by multiple layers of security.
- Convenience: Demat is more convenient than holding physical share certificates, as you can access your shares from anywhere with an internet connection
What is the After Process?
Ensure that the IEPF 5 Filling form is free of errors, as any mistakes cannot be corrected after submission. Additionally, only one form can be filed for one company using one Aadhaar Number. Prepare all necessary documents according to the situation and review them before submitting them.
The IEPF Form 5 is submitted on the Ministry of Corporate Affairs portal. It is then sent, along with accompanying documents, to the relevant company and authority for validation and further processing.
Once submitted, the company and IEPF Authority will review the documents. They will notify us if there are any discrepancies. If no issues are found, the process continues. The Transmission of Shares to the respective demat account and any unclaimed dividends are deposited into the investor’s bank account.
Convert Physical Shares to Demat
Any individual or entity can Convert Physical Shares to Demat that holds physical share certificates can convert them to dematerialized (Demat) form. This process is commonly known as “dematerialization.” Here’s a breakdown of who can convert physical shares to Demat:
Individual Investors
Any individual who holds physical share certificates of a company can do Dematerialization of Shares. This is a common practice to streamline and modernize the ownership and trading of shares.
Companies and Corporations
Corporate entities that hold physical share certificates can also opt to dematerialize their shares. This is particularly relevant for companies that wish to simplify their shareholding structure or facilitate trading and Transfer of Shares.
Trusts and Institutions
Trusts, educational institutions, charitable organizations, and other non-individual entities to convert Demat of Physical Share Certificate to ensure efficient management and potential trading if required.
Joint Holders
In the case of joint holding of physical shares, all joint holders need to be part of the dematerialization process. The Demat account will reflect the joint ownership pattern and can be easily done Transmission of Shares.
Minor Shareholders
Shares held by minors can also be dematerialized. In such cases, the guardian or custodian of the minor’s account will need to initiate and oversee the process.
Foreign Investors
Foreign investors who hold physical shares in Indian companies can also convert them to Demat form. This can simplify the process of trading and managing investments for international investors.
How to Dematerialize Shares?
Here are the steps on How to Dematerialize Shares:
Open a Demat Account
To start, you need a Demat account with a registered Depository Participant (DP). Choose a reliable DP and complete the account opening process.
Submit Dematerialization Request
Obtain a Dematerialization Request Form (DRF) from your DP or download it from their website. Fill in details like company name, ISIN, certificate numbers, and quantity of shares.
Attach Share Certificates:
Attach the physical share certificates you want to dematerialize along with the filled DRF. Ensure they are endorsed with “Surrendered for Dematerialization” and signed by all shareholders.
Submit to DP
Submit the DRF and physical certificates to your DP. They will verify the details and forward the request to the relevant authorities.
Share Verification
The share registrar will verify the details with the company’s records. This process usually takes a few weeks.
Electronic Credits
Once verified, the equivalent electronic shares will be credited to your Demat account. You will receive a statement confirming the dematerialization.
Physical Share Cancellation
After successful dematerialization, the physical share certificates will be defaced to prevent any misuse. They won’t be valid for trading anymore.
Monitor Demat Account:
Regularly monitor your Demat account to ensure the credited shares are accurate.
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.