Dematerialization is the process of converting physical securities into digital form. These electronic records of securities of each investor will be stored in Deposoitories through Depository Participants. There are only 2 depositories in India - CDSL (Centralized Depository Services (India) Limited) and NSDL (National Securities Depositories Limited). Agents registered with these depositories for facilitating the process of holding securities in electronic form are called Depository Participants. There are several registered depository participants in the market which include banks and stockbrokers.
It is now mandatory for the investors of both the public and private companies except small companies to hold the securities in dematerialized form to make transfers / to receive bonus shares / to subscribe for rights issue.
Small Company - company other than a public company which does not have paid up share capital exceeding Rs. 4 crores and turnover of which does not exceed Rs. 40 Crores.
Dematerialization process:
- Open a demat account preferably with the stockbrokers who can open trading account simultaneously. (Decision factor: the way of support i.e., online / offline or both, pricing - brokerage per transaction annual maintenance charges (AMC), valid operating license, reliability and trust, use of technology and easy to use app / web interface.)
- Documents required for dematerialization
- Demat Request Form (DRF) - can be download from stockbroker's website or can request them via mail or avail them in their branch office.
- Original share certificate.
- Form ISR - 1 to update KYC details (can be downloaded from the company / registrar & transferor / stockbroker / Stock exchanges / SEBI websites).
- Form ISR - 2 for Confirmation of Signature of securities holder by the Banker (can be downloaded from the company / registrar & transferor / stockbroker / Stock exchanges / SEBI websites which needs to be signed by the bank branch manager along with his / her details like employee code, email id, mobile no for which they will debit charges from your account).
- Form SH-13 to register nominee details (can be downloaded from the company / registrar & transferor / stockbroker / Stock exchanges / SEBI websites).
- Cancelled cheque for supporting bank account details in which dividend to be received.
- Self-attested id and address proofs like PAN, Aadhaar / Driving license / Voter id copies of the security holders.
- All the above documents to be filled & signed by the shareholders at prescribed places and physical copies to be submitted to the depository participants / stockbrokers. Visit their branch office for submission else submit a soft copy of all the documents through mail and get confirmation that all the documents are proper and sufficient then courier the hard copies to their office through registered / speed post.
- Once they start the dematerialization process, you will receive service request reference, and you can follow up the status using such reference.
The process will mostly be completed within 30 days. If there is any delay, follow up directly with the concerned parties like registrar & transfer agents, company etc. so that you cannot lose original share certificates in the process.
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