Dematerialization of Shares – Your Gateway to Modern Investing
Seamlessly shift from physical to electronic share ownership with our Dematerialization service, ensuring safety, security, and swift transactions
Overview
Dematerialization is the process by which physical certificates of securities are converted into securities in electronic form by way of credit in investor’s demat account held with a Depository. Dematerialization is change in form of holding from physical to electronic, it does not result into change of ownership.
Further, Ministry of Corporate Affairs, by its notification issued on 27th October, 2023 amended Companies (Prospectus and Allotment) Rules, 2014 and mandated the dematerialization of shares of Private Company, other than small company on or before 30th September, 2024. As per this notification all the Private Companies which as on the last day of financial year ending on 31st March, 2023 is not a small company, as per audited financial statements, shall within 18 months from the closure of the financial year facilitate dematerialization of its securities.
Depositories
A depository is an organisation which holds securities (like shares, debentures, bonds, government securities, mutual fund units etc.) of investors in electronic form at the request of the investors through a registered Depository Participant.
At present two Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) are registered with SEBI.
A Company willing to admit its securities with Depositories must appoint Registrar and Transfer Agent (RTA) to manage the share transfer facility.
Depository Participant
Advantages of Dematerialization
- Elimination of risks associated with physical certificates such as bad delivery, fake securities, lost of certificate, theft, etc.;
- Reduction in paperwork involved in transfer of securities;
- A safe and convenient way to hold securities;
- Immediate transfer of securities;
- Reduction in transaction cost;
- Change in address recorded with DP gets registered electronically with all companies in which investor holds securities, eliminating the need to correspond with each of them separately;
- Automatic credit of shares in demat account, arising out of split / consolidation / merger etc;
- No odd lot problem, even one share can be traded;
Process for Dematerialization
- Shareholder holding securities in physical form has to submit duly filled and signed demat request form (DRF) or Dematerialization request form to his DP.
- DP will verify the details and setup demat request in the system. The DP will then deface and mutilate the certificate and send the same along with the DRF to Issuer/ RTA.
- On confirmation by the Issuer/ RTA, the shareholder’s account will be credited with the number of securities dematerialized.
- For the above process, the Company already need to have the following, in order to facilitate the dematerialization of shares by shareholders:
- Clause in AOA authorizing the shareholders to hold shares in Demat for,
- The Company should have appointed RTA,
- The Company must have been issued ISIN for each class of iths securities.
FAQs
Yes, it is possible through a process known as re-materialization. To revert securities to physical form, individuals need to complete the Rematerialisation Request Form (RRF) and request their Depository Participant (DP) for the re-materialization of their securities account balances.
Absolutely, even odd lot share certificates can undergo the dematerialization process.
It usually takes about 30 days. If it exceeds this period, contact your DP. If they can’t assist, reach out to the Investor Complaint Cell at NSDL or CDSL
ISIN, which stands for International Securities Identification Number, is a distinct alphanumeric identifier consisting of 12 characters, assigned to a security (e.g., INE383C01018). It’s important to note that securities such as fully paid-up equity, partly paid-up equity, and equity with varying voting or dividend rights, issued by the same entity, will each possess unique ISINs.
