DEMATERIALSIATION OF SHARES
What is Dematerialisation of Shares?
Dematerialisation is the process of converting physical shares into electronic format. An investor who wants to dematerialise his shares needs to open a demat account with Depository Participant. Investor surrenders his physical shares and in turn gets electronic shares in his demat account.
Depository is the body which is responsible for storing and maintaining investor's securities in demat or electronic format. In India there are two depositories i.e. NSDL and CDSL.
Advantages of Dematerialisation of Shares:
1. Demat format reduces the risk of bad deliveries2. Time and money is saved as you are not dealing in paper now. You need not go to the notary, broker for taking delivery or submitting the share certificate
3. Liquidity is very high in case of demat format as whole process in automated.
4. All the benefits of corporate action like bonus, stock split, rights etc are managed through the depository leading to elimination of transit losses
5. Interest on loan against demat shares are less as compared to physical shares
6. Investors save stamp duty while transferring shares in demat format.
7. One needs to pay less brokerage in case of demat shares
Procedure for Dematerialisation of Shares:
1. Dematerialization starts with opening a Demat account by shortlisting a Depository Participant (DP) that offers Demat services.
2. To convert the physical shares into electronic/Demat form, A Dematerialization Request Form (DRF), which is available with the Depository Participant (DP), has to be filled in and deposited along with share certificates. On each share certificate, ‘Surrendered for Dematerialization’ needs to be mentioned.
3. The DP needs to process this request along with the share certificates to the company and simultaneously to registrars and transfer agents through the depository.
4. Once the request is approved, the share certificates in the physical form will be destroyed and a confirmation of dematerialization will be sent to the depository.
5. The depository will then confirm the dematerialization of shares to the DP. Once this is done, a credit in the holding of shares will reflect in the investor’s account electronically.
6. This cycle takes about 15 to 30 days from the submission of dematerialization request
If the shares value is less than 2 lac then the documents needed are as under:
1. A request letter duly signed by legal heirs.
2. An attested copy of the death certificate of deceased (If applicable)
3. Copy of Letter of Administration / Probate / Succession certificate, duly attested/notarised.
OR Letter of Indemnity on non-judicial stamp paper (NJSP) of Rs.500/- and a affidavit executed on Rs.100/- on (NJSP) duly attested/notarised.
4. Original share certificate(s).
5. Attested copy of Legal Heir Certificate is required.
6. Provide Legal Heir(s) Proof of address documents like Telephone Bill / Electricity Bill / Voter ID Card/Driving License etc if there is any change in address.
7. Self-attested copy of PAN Card.
8. Cancelled cheque leaf.
In case, the shares value is more than 2 lac then documents needed are as under:
1. A request letter duly signed by legal heirs.
2. An attested copy of the death certificate of deceased (If applicable)
3. Copy of Letter of Administration / Probate / Succession certificate, duly attested/notarised.
4. Original share certificate(s).
6. Provide Legal Heir(s) Proof of address documents like Telephone Bill / Electricity Bill / Voter ID Card/Driving License etc if there is any change in address.
7. Self-attested copy of PAN Card.
8. Cancelled cheque leaf.