Process of dematerialization

Process of dematerialization

As per the regulations spread out by the Securities and Exchange Board of India (SEBI), in case of listed company we can only trade and invest in shares that are in the dematerialized layout.?

The basic motive behind this step is to relieve the process of buying, selling, and transferring the shares of a company.?

If someone is holding physical share certificates, it is required to convert them into an electronic format first, before selling or transferring the shares.?

The whole process of converting the physical shares of a company into an electronic form is commonly known as the dematerialization.?

However, From October 2018, it’s become mandatory for all the Public Limited Companies also to Issue, Transfer shares only in Demat form.

Applicability of dematerialization:

Every unlisted public company shall –

1.??????????????????issue the securities only in dematerialized form; and

2.??????????????????facilitate dematerialization of all its existing securities?

in accordance with provisions of the Depositories Act, 1996 and regulations made thereunder.

·???????????????????Following Unlisted Public Companies are exempted from dematerialization:

1.????Nidhi Company;

2.????Government company; and

3.????Wholly owned subsidiary.

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A Private Limited Company is not required to convert its shares into Demat

(However, if a private company is a subsidiary of public company, then it will be considered a deemed unlisted public company and therefore it is required to convert its shares into demat).?

Let’s take a quick look at the procedure implicated in the conversion of physical shares to the Demat form.?

1.???Demat Account Opening:

Before applying for conversion, the first step to be followed is to open a trading and Demat account opening process with a depository participant (DP).?

(A depository participant functions as a broker or intermediary between the investor and the depository).?

Note: A depository participant can be any authorized bank, stock brokerage, or other private companies that deliver Demat account opening assistance.?

Steps involved in the process of opening a trading and Demat account-

• Visit the website of your preferred DP.?
• Click on the ‘open a Demat and trading account’ link.
• Fill in the Demat and trading account opening application.
• Upload scanned copies of all the necessary Know Your Customer (KYC) documents (address proof and identity proof like PAN card, Aadhar card, passport size photographs, etc.)
• Sign the agreement with your DP along with the schedule of charges. This agreement includes the duties and obligations of both the depository participant as well as the account holder. Therefore, it is a suitable notion to read them absolutely before attaching your signature.
• Once all the appropriate documents are submitted, the application will be processed by the DP.
• Upon successful acceptance of your Demat and trading account application, you will receive a unique user ID and password for accessing your trading and Demat account number.

2.???Request the dematerialization Request Form (DRF)

After opening a Demat account, the next step is to place a request for the conversion of the physical share certificates into the dematerialized format.?

The steps for raising a dematerialization request with your DP.

• Request your depository participant for a Dematerialization Request Form (DRF).
• After thoroughly reading the DRF, fill the form and provide the required details and attach your signature and forward the duly filled form to your DP.?

3.???Surrender the physical share certificates

Along with the DRF, submit your physical shares certificates. ?

*Note: You’re required to mention ‘Surrendered for Dematerialization’ on each of the physical share certificates.

4.???Acceptance of the application

Your DP will process your request after receiving the DRF along with the surrendered share certificates.

?(An acknowledgment slip will be issued to you for surrendered shares)

5.???Process of application

A dematerialization request is shipped electronically by your DP to the Company’s appointed Registrar and Share Transfer Agent (RTA).?

6.???Conversion of shares in electronic form:

Once the dematerialization request is sanctioned, the physical share certificates are destroyed and the Demat account gets credited with the relevant number of shares.

The absolute process for conversion of physical share certificates into dematerialized form is likely to take approximately 2 to 3 weeks.?

Once your Demat account gets credited, you are unrestricted to either sell or transfer your shares as and when you require.

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION

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