The clause in Depositories Act 1996 allows an investor to hold securities in physical as well as electronic form at the same time. That means the law has given the freedom to the investor to either own shares in physical form or Demat form or both at the same time. However, the clause under Regulation 40 of Listing Obligation and Disclosure Requirements by SEBI stated that the entire accumulation of securities owned by the investors will be preserved in Demat Form. The law was said to implement from 5 December 2018. The implementation was then postponed to 1 April 2019 by SEBI. Finally, the latest norms under Companies Act 2019, demanded companies to imperatively keep their shares in dematerialized form starting from 24 October 2018. Companies were then bound to keep the shares in the Demat account which made it impossible for them to transfer any share in physical format and issue physical share certificate from 1 October 2019 respectively. The implementation of the law under Companies Act 2019, also made it obligatory for the investors to get their share dematerialized and hold them in the form of a Demat Account to avoid future hassles. Currently, several investors are already owing their shares in Demat Form while remaining shareholders still need to get their Demat Account opened and get their shares dematerialized. To be Noted:- Similar to a Bank Account holding money in electronic form, Demat Account holds shares and securities in an electronic form. To get the shares and securities in electronic form, Shareholders need to approach the SEBI registered Depository Participant (DP) and get an account opened under their name. Procedure for Dematerialisation of Shares
Below mentioned are the steps for getting the securities converted in the Dematerialized form:
- Shareholders need to submit a Dematerialization Request Form (DRF) along with their Physical Share Certificate(s) to the respective Depository Participant (DP).
- The Physical Shares and the DRF surrendered by the investor will duly be verified by the DP.
- The shareholder is required to upload the details mentioned in the DRF and Share Certificates in the depository software or application.
- Dematerialization Request Number (DRN) will thereon be generated.
- Electronic dispensation of DRF with the DRN stated on it along with certificates, to the Registrars and Transfer Agents (RTA) of the company by the DP for authentication and approval.
- Depository Participant (DP) will thereon notify the Registrar and Share Transfer Agent (RTA) about the shareholder’s request via an electronic system of NSDL/CDSL.
- Registrar & Share Transfer Agent will then verify the request duly.
- The acceptance of shareholder’s request for shares dematerialization will be confirmed by the respective RTA by the medium of the same software.
- Allotment of the said number of shares in the Demat Account formed under the name of the shareholder by the depositories software system.
- Following the completion of the entire Demat Account opening process, the concerned shareholder will get the information of the same by the DP along with the endorsement of the DRF.
Note:- There are instances when the DRF is rejected by the respective authorization (Company or RTA) the obligation memo is then extended to the concerned DP (with or without DRF) along with the reason for rejection. The error is then rectified by either the DP or shareholder (whosoever is responsible) within 15 days of the arrival of objection letter.
To be Noted:-
- Shareholder or DP (whosoever is responsible) must rectify the said errors within 15 days of the arrival of obligation notice by the company or RTA else the request (DRF) along with the annexures certificates will permanently be rejected by that company or RTA.
- Upon denial of the old request, a new request can again be made following the resubmission of the certificates and DRF to the company or Registrar and Transfer Agent for dematerialization.
- The new request for the same security cannot be quoted until the old one is pending with the company or RTA. Only after the notification by the company or RTA related to the refusal of the request is received by the DP the new request can be submitted.
For questions related to Dematerialization or any other Mutual Fund related compliance one can approach any RTA - certified by SEBI. SAG RTA is one such RTA agency operative PAN India and is Rajasthan’s 1st SEBI qualified RTA agency.
One can easily reach out to SAG RTA with any query related to changing of personal details, recording transactions; dividend payment through ECS transfer, along with additional services such as the settlement of EPF claims, regulatory reporting to the authorities, securities dematerialisation via NSDL, CDSL, and so on..
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