Let’s say you’ve discovered a handful of long-forgotten share certificate documents you own deep inside your cupboard. As you go through the papers, you find that these physical shares, although old, are still trading on the stock exchange. You feel like you’ve found a hidden treasure! But, it suddenly strikes you that physical share certificates are no longer traded on the stock markets. What then will happen to your share certificates? Let’s find out.
According to the mandate issued by The Securities and Exchange Board of India [SEBI], beginning 2019, only electronic shares can be transacted on the stock markets. That means shares held in the physical form cannot be sold or transferred. To ensure they have transactional value, you need to convert physical shares to demat.
Importance of dematerialisation
Converting physical shares of a company into its electronic format is regarded as dematerialisation or demat. Once you’ve converted your physical shares into electronic form, you can store them in your online demat account. However, any physical shares you hold must be of active companies currently trading on the stock exchange. If the companies are no longer trading on the stock exchange or delisted, those documents will not have any value.
If you’re looking to convert active or listed company shares to demat, here’s what you need to do:
Register with a Leading Brokerage Company to Open a Demat Account
Reputed brokerage companies are depository participants or stockbrokers. These entities play a critical link between the depository and the investor. To open your demat account with the stockbroker, you must furnish your Know Your Customer [KYC] documents. They include address proof, identity proofs — passport copy, Aadhaar card, PAN card etc. Additional documents include the filled account opening form and a recent passport-sized photograph.
All leading depository participants that offer demat account opening services, such as banks and financial institutions, stock brokerage companies, private and government institutions, provide online demat account opening services. When opening your online demat account, remember to open it in the names of all joint shareholders as specified in the combined shares. Therefore, the holding order must be first and second in your new online demat account as stated on the physical share documents.
Submit Physical Share Documents Along with the Dematerialised Request Form [DRF]
On opening your online demat account, you can request to convert physical shares to demat format. To do so, you need to submit your physical share documents to the stockbroker along with the completed Dematerialised Request Form [DRF]. Here are some of the important values you need to fill out in the DRF:
o Depository Participant ID
o Account number
o Account holder name
o Choose the physical certificate or option letter
o Mention the number of securities to convert physical shares to demat
o Mention the name of the security as stated on the physical share certificate
o Face value of the security
o Type of security — debenture, bond, equity or any other.
o State the certificate number, folio number and distinctive number
o Mention the total number of shares to be surrendered
o Sign on the document
o State the acknowledgement
If you hold physical share documents of different companies, you will need to fill separate DRFs. When surrendering your paper shares, remember to cancel every certificate by writing “Surrendered for Dematerialisation” on each document. On submitting your shares, you will receive an acknowledgement slip from the stockbroker.
Once your dematerialisation request is approved, it will be verified. Upon successful verification, your physical share documents will be destroyed, and you will receive the dematerialised shares in your online demat account.
With the successful conversion of your physical share certificates into their dematerialised form, you can now sell or transfer these shares and claim their value.
To get the most from your online trading investments, finding the best brokerage company is imperative.
ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. – ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025, India, Tel No : 022 – 2288 2460, 022 – 2288 2470.The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.