A Guide for Dematerialization of Physical Shares

Differentiating Demat and physical shares

The difference between a dematerialized share and a physical share can be understood as the difference between money saved in the bank account and a physical currency note. A transaction of physical currency notes into a bank is as simple as depositing as compared to the dematerialization of a share certificate which is a time-consuming task.

The shares dematerialization can only be processed if the shares are transferred to the holder’s name. Incase any share is held as a blank transfer cannot be dematerialized until it gets first transferred in the name of a DP account holder. While for the situation, when there is a joint holding of shares, they can only be dematerialized in case the shareholders having a DP account in the same order. For a proper understanding of the transfer of shares, you are required to consider given below facts.

Ponder to Demat your shares, follow the steps listed below to get dematerialized your physical shares. 

• Firstly collect your Dematerialization Request Form from your DP. 
• Provide the details required to fill in the form such as the account holder’s name, client ID, details of shares listed to get dematerialized along with the signatures of all the account-holders in the lower section of the form. 

Read Also:- Role and Responsibility of a Registrar and Share Transfer Agent in Mutual Fund Houses

Things need to be considered before sending shares to Demat land:

• Ensure shares' availability for dematerialization.  
• For different companies, there is a need for filing separate requests. 
• A separate request requires different ISIN (International Securities Identification Number) numbers which can be obtained from the DP by showing the share certificates. The shares which are transferred for the dematerialization should be held in the same name, and the order of holders also the mentioned details should be similar in the opened DP account. 
• Now proceed to write “Surrendered for dematerialization” across the face of the certificate. 
• Punch two holes on the certificate.
• Submit these shares certificates available for dematerialization along with the Dematerialisation Request Form to the DP to proceed further. 

The reason behind the defacing of the certificates is that they will eventually be destroyed and no one can misuse these physical share certificates.

What happens after the shares leave your desk

After leaving the desk, the depository performs internal processing on shares and pass them on to the related company for dematerialization purpose. The company now proceed for the verification of the details in the request form and the signature matching as well from the sample stored in their records. In case no issue is found in the request, the company dismantles the certificates and makes a transfer entry of dematerialized shares into the client ID against the received request.

In case, any mismatch issue is found in the request, the company returns the shares to the DP along with the concerned reason for rejection. Now the DP will contact the client for the rectification of the issue and the shares will again be sent to the company for dematerialization. This is the whole process of converting physical shares to digital shares.