How to Convert Physical Shares into Demat

If you’re looking for information on how to convert physical shares into demat form, then you’ve come to the right place. Through this article, we will explain how to convert old share certificates into demat and the importance of doing so.

Introduction - Why do you need a Demat Account?

A demat account is required in India to hold shares and securities in an electronic format, as opposed to holding physical certificates. This makes buying, selling, and trading equity shares more efficient and convenient. It also eliminates the need for the safekeeping of physical certificates and reduces the risk of them being lost or stolen. Additionally, shares held in a demat account are easily transferable, which makes the process of buying and selling shares more streamlined.

SEBI (Securities and Exchange Board of India) introduced the concept of dematerialisation in India in 1996. In this process, you convert physical shares into a demat format, which is held in a demat account. The National Securities Depository Limited (NSDL) was set up by SEBI in 1996 as the first central securities depository in India to facilitate dematerialisation of securities. Subsequently, the Central Depository Services Limited (CDSL) was also set up in 1999 as the second central securities depository in India.

Read Also: What are the Features of Demat Account

Documents Required to Convert Physical Share to Demat

To convert physical share certificates into dematerialised form, SEBI requires the submission of specific documents. Here’s a comprehensive list of the necessary documents and steps to complete the conversion process in India:

• Proof of Identity:

  Provide a photo ID for verification, which can include a driving licence, voter ID card, PAN card, or Aadhaar card.

• Proof of Residence:

  Submit documents to verify your residential address. Acceptable documents include a driving licence, passport, utility bills (electricity, gas, telephone), insurance documents, or lease agreements.

• Proof of Financial Status:

  Include a recent bank passbook or account statement from the last three months to confirm your financial status.

• Physical Share Certificates:

  Ensure that the original share certificates are in good condition with all details clearly legible. These certificates must be submitted for dematerialisation.

• Dematerialisation Request Form:

  Fill out the dematerialisation request form accurately. If you are converting shares from multiple companies, you need to submit separate forms for each company.

• Defacing Certificates:

  Before submission, deface each physical share certificate by writing ‘Surrendered for Dematerialisation’ on them. This step is crucial to prevent any future misuse of the certificates.

• Acknowledgement Slip:

  After you surrender the certificates, the Depository Participant (DP) will issue an acknowledgement slip confirming the receipt of the certificates for dematerialisation.

Following these guidelines will help ensure a smooth and efficient conversion process of your physical share certificates into demat form.

What Are the Steps to Convert Physical Share to Demat?

Now that you know the background and importance of a demat account, let us understand how to convert old shares into demat.

• Step 1 – Open a Demat Account with a Depository Participant (DP)

  A DP acts as an intermediary between you and the SEBI registered depository. If you don’t already have an active account then you need to open a demat account with a Depository Participant of your choice. This is a fairly simple and straightforward process and can be achieved online in a matter of a few minutes.

• Step 2 – Complete the Dematerialisation Request Form (DRF)

  Once you have an active account, you can request to convert physical shares to demat form. For this, you will need to fill out a DRF and surrender your physical shares to your DP. Note: Fill the form carefully, ensuring there is no mismatch of information (like name, DP ID, etc.) to avoid rejection or delays in processing.

• Step 3 – Surrender the shares for scrutiny

  The DP will verify the details and stamp the certificates before sending the share certificates to the Registrar and Share Transfer Agent (RTA) of the respective company. It will also generate a Dematerialisation Registration Number (DRN) that will be tagged to your request. After the company confirms the dematerialisation request, the shares will be credited to your demat account.

Benefits of Holding Shares in Demat

Holding shares in a dematerialised (demat) form offers numerous advantages compared to traditional physical share certificates. Here are some key benefits:

• Enhanced Safety:

  • Reduced Risk of Loss: Physical share certificates can be lost, damaged, or stolen. Dematerialisation eliminates these risks by storing shares electronically.
  • Fraud Prevention: The electronic format helps reduce the risk of fraud and forgery associated with physical certificates.

• Ease of Transaction:

  • Simplified Trading: Buying, selling, and transferring shares is more straightforward and quicker in demat form. Transactions are executed electronically, which speeds up the process.
  • Convenient Management: Investors can manage their holdings and track transactions through online platforms provided by depository participants (DPs).

• Reduced Paperwork:

  • No Physical Certificates: Demat accounts eliminate the need for physical share certificates, reducing paperwork and administrative hassles.
  • Efficient Record-Keeping: Electronic records are automatically updated, minimizing errors and making it easier to maintain accurate records.

• Faster Settlement:

  • Quicker Transfers: Transactions are settled more rapidly in a demat account, typically within a few days, compared to the longer time required for physical share transfers.

• Cost Savings:

  • Lower Transaction Costs: Demat accounts often incur lower costs for transactions compared to the expenses associated with managing physical certificates, such as stamp duty and courier fees.

• Convenience of Holding Multiple Securities:

  • Simplified Management: Investors can hold various types of securities, including shares, bonds, and mutual funds, in a single demat account, simplifying portfolio management.

• Automated Corporate Actions:

  • Dividend Payments: Dividends, interest payments, and other corporate benefits are automatically credited to the investor’s bank account, reducing the need for physical cheque handling.
  • Corporate Communications: Notifications regarding corporate actions, such as rights issues or bonus shares, are communicated electronically, ensuring timely updates.

• Ease of Transfer:

  • Seamless Transfers: Transferring shares to another demat account is straightforward and can be done electronically, without the need for physical paperwork.

• Regulatory Compliance:

  • Adherence to Standards: Demat accounts comply with regulatory requirements set by financial authorities, ensuring that transactions are transparent and secure.

• Increased Transparency:

  • Clear Records: Electronic records provide a clear and detailed view of all transactions, holdings, and changes, enhancing transparency and accountability.

Holding shares in demat form offers significant advantages in terms of security, convenience, and efficiency, making it the preferred choice for modern investors.

Conclusion

Now that you understand the process of converting physical shares into demat form with the help of your Depository Participant (DP), it’s essential to ensure that your shares are free of any disputes and are in good condition before initiating the dematerialisation. Additionally, be aware of any nominal fees that your DP might charge for this service.

Holding shares in demat form offers numerous benefits, such as enhanced safety, easier transactions, and reduced paperwork. If you are looking to streamline and elevate your investment experience, m.Stock provides several advantages. By choosing m.Stock for your demat needs, you gain access to a user-friendly platform that simplifies portfolio management, offers competitive fees, and provides excellent customer support.

m.Stock’s demat account also integrates seamlessly with trading accounts, making it easier to buy, sell, and manage your investments from a single interface. With m.Stock, you can enjoy the convenience of real-time tracking, automated corporate actions, and comprehensive investment insights, all designed to enhance your investing experience.