The union government has placed limits on and outright prohibited the sale of physical share certificates as of April 1st, 2019. If you still own physical shares from that period, do not worry. We’ve outlined how to convert physical shares to Demat form.
If you still have doubts about converting them, you should eliminate them. Remember that you must convert physical share certificates into a dematerialized (Demat) or electronic format to trade or deposit shares with a company or its RTA for future transfer.
It is also only possible to convert shares of publicly listed firms. Suppose the stock exchange delisted the company. It may have put you out of the picture since they are now worthless.
The Regulation
Per the 2015 SEBI (Listing Obligations and Disclosure Requirements) Regulations, listed businesses are not authorized to accept requests for the transfer of physical securities.
Why did this event occur? Investors will find it easier to transfer and sell corporate shares. Additionally, this improvement will reduce the likelihood of fraud and manipulation during the transfer of shares by dishonest parties.
Holding shares in Demat form will also improve investor transactions’ ease, convenience, and security.
Although it may look easy to form a Demat account immediately, this is not always the case. It is challenging to convert physical shares to digital ones since only listed corporations and their RTAs accept requests for the transfer of physical shares.
What is a Demat Account?
The SEBI (Securities and Exchange Board of India) launched Demat accounts in India in 1996. SEBI’s establishment of a Demat account was one of the most important new aspects as it transformed investing into a digital procedure.
Dematerialization, often known as “Demat,” turns physical securities into digital forms. Consequently, a trader may hold, transfer, and transact securities utilizing a Demat account without physically handling the assets.
Trading has become a safer, faster, and more effective way to carry out transactions and keep assets. Therefore, if you want to trade new shares or apply for a company’s IPO at the Upcoming IPO in India, you must have a Demat account.
How Can You Dematerialize Your Physical Share Certificates?
The current process of preserving share ownership requires dematerializing physical share certificates. However, you must convert the physical shares to an electronic representation (Demat) before selling or transferring them.
Dematerialization is converting physical company shares to an electronic format (Demat). Before attempting to convert physical shares, you must establish the Best Demat Account in India with a Depository Participant (DP).
How to Convert Physical Shares to Demat Form
- Establish a Demat Account
Step 1: On the website of your preferred DP, you may quickly open a Demat and trading account.
Step 2: Go to their website and choose the “Open a Demat and Trading Account” option.
Step 3: Please fill out the application completely.
Step 4: Upload scanned copies of all the required Know Your Customer documentation (KYC)
Step 5: Sign the charges and the agreement with the DP. This contract details the account holder and the depository participant’s obligations and liabilities. As a result, it’s crucial to read them thoroughly before signing.
Step 6: The DP will handle your application after receiving the necessary documentation.
Step 7: Upon approval of your Demat and trading account applications, you will receive a Demat account number, a unique user ID, and a password to access your trading account.
- Submit a Share Dematerialization Request
After opening a Demat account, you must submit a request to convert your physical share certificates into the dematerialized format. You may raise a dematerialization request with your DP by doing the actions outlined below:
Step 1: Request a Dematerialization Request Form from your DP (DRF).
Step 2: Complete the DRF with all necessary information and sign it.
Step 3: Send your DP the correctly filled out form and your physical share certificates. Each physical share certificate must state “Surrendered for Dematerialization.”
Step 4: A DP will process your request following receipt of the DRF and the physical share certificates.
Step 5: Subsequently, your DP would submit the dematerialization request to the Registrar and Share Transfer Agent (RTA) designated by the relevant company.
Step 6: The shares are credited to your Demat account immediately following the dematerialization request’s approval.
Required Documents for the Demat Conversion of Physical Share Certificate
When you get the share certificates, you take a fractional ownership interest in the corporation that issued the shares. However, opening a Demat account requires specific documents, followed by request to dematerialize a physical share certificate.
For the transfer of physical shares to Demat India, the following papers are necessary: :
- Identifying papers with photographs includes driver’s licenses, PAN cards, voter ID cards, and Aadhaar cards.
- Other acceptable proofs of residence are your driver’s license, passport, landline phone bill, electricity bill, apartment maintenance bill (if applicable), copy insurance, and gas bill.
- Your proof of bank account will be your bank’s passbook or account statement (must be no more than three months old).
- Please provide a genuine paper copy of any stock certificates you own. The information on the stock certificates must be legible and in pristine condition. Remember that you cannot use a duplicate of a physical share certificate to establish that you own the shares if you own one.
- Form for Dematerialization duly filled out for shares of many companies. You must use separate forms. For example, if you hold 5 shares in both XYZ and PQR, you must complete two distinct forms for each company.
- On the physical share certificates, each paper share must be labeled “Dematerialization Surrendered.” Don’t forget to get an acknowledgment document for the shares you relinquish.
The physical certificates become invalid once you file all the paperwork to convert physical shares to Demat and new electronic shares are issued. As soon as these shares appear in your Demat account, you may start trading and purchase or sell more shares as needed.
The Final Word
Trading activities involving physical share certificates that existed before April 1st, 2019, are illegal now. You may only lay a claim to ownership of the shares via transactions made through your Demat account. To avoid losing your Demat account number, you must maintain your Demat account safe.