How To Dematerialize Your Shares

To dematerialize your share certificates you have to:

  • Fill up a dematerialization request form, which is available with your DP;
  • Submit your share certificates along with the form; (write “surrendered for demat” on the face of the certificate before submitting it for demat)
  • Receive credit for the dematerialized shares into your account in 15 days.

Dematerialized shares do not have any distinctive or certificate numbers. These shares are fungible – which means that 100 shares of a security are the same as any other 100 shares of that security.

The investor can dematerialize only those certificates that are already registered in his name and belong to the list of securities admitted for Dematerialization at NSDL. Shares held in street name (market deliveries) cannot be dematerialized. If the share certificates that investor wants to dematerialize do not belong to the list of securities eligible for Dematerialization specified by NSDL, he can approach the company and request them to sign up with NSDL to make their securities available for Dematerialization. Odd lot share certificates can also be dematerialized.

No transfer deed is required for dematerializing certificates, the certificates have to be accompanied by a demat request form (DRF) which can be obtained from DPs. It is compulsory to mention the ISIN number of the company while filling up the Demat Request form. This, to a certain extent, ensures that the security mentioned in the Demat Request Form is the same as the one the investor intends to dematerialize. However, the investor need not remember cryptic numbers and can take the help of his DP in filling these forms.

Dematerialization is not compulsory. According to the Depositories Act, 1996, an investor has the option to hold shares either in physical or in dematerialized form. An investor can hold part of his holdings in demat form and part of his holdings in the form of share certificates for the same security.

Although the depository would be a registered owner of securities in the depository, a transaction involving dematerialized securities would not be considered as benami transactions, the Benami Transactions (Prohibition) Act, 1988 have been suitably modified to exclude the securities held by a:

  • Depository as a registered owner
  • DP as an agent of the depository.

Securities bearing the same distinctive numbers as demat securities can still float in the market. It is a case of forged certificates and normal procedures that are being followed in the physical market will be used to weed them out. The concerned stock exchanges where the securities are listed are informed of the details of securities dematerialized and rematerialized.

An investor can dematerialize shares that are pledged with a bank, which is a DP as well.

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