Dematerialisation of physical shares
The Securities Exchange Board of India (Sebi) on June 8, 2018 issued a new set of amendments under the Sebi Regulations 2018. This amendment, starting April 1, 2019, will not allow investors holding shares of listed companies in physical form to transfer them. Initially the date of applicability of this amendment was December 5, 2018, which has now been extended to April 1, 2019. Investors holding shares of listed companies in physical form, starting April 1, 2019, will be only allowed to transfer or sell them if they have been converted to dematerialised form (Demat Form).
Mandatory demating
The number of frauds with respect to physical form of shares have been were high in number; also transfer of these shares were problematic. Further, there used to be unclaimed dividend that accrued on these shares. With this amendment, there shall be a mandatory link between the bank account of the investors and their respective Demat account, which will eliminate fraud or substantially limit it, as it will allow Sebi to have easy and full access to trading information of all investors and their investments in a listed company. Having said that, the physical form of shares does not lose its value post this amendment, as the amendment by Sebi does not take away the value of any physical shares but only restricts the transfer of such shares post April 1, 2019.
So, investors who still want to retain the physical form of shares can surely do so, but Sebi will restrict investors or shareholders from transfering or selling the same unless they have converted them into Demat form. Moreover, these shares will also become illiquid, which means that, while these shares have their intrinsic value linked to the company’s stock price in the market, to realise that value the shareholder will have to convert those shares in the physical form to the Demat Form and then sell in the market and receive money in their bank account.
Limits and procedures
In case physical shares are held in the name of a deceased person, Sebi has ascribed some limits and provided some procedures which must be complied with by the legal heir of such deceased person. Accordingly, if the current value of shares is up to Rs 2 lakh then the legal heir can approach the company whose shares he has, along with death certificate of the deceased and if the value exceeds Rs 2 lakh, then the legal heir needs to appoint a lawyer to get a probate from the court to establish legal ownership.
As a matter of bitter fact, every change takes time for it be internalised, and everyone faces the brunt of it, whether it’s Sebi, investors, registrar, transfer agent or anyone who is directly or indirectly part of this existing channel. A few will be reluctant to accept the new rules, but they need to understand that shifting to Demat mode will be of utmost benefit to them. For instance, when shares held in physical form are lost or damaged, then re-issuing of the same requires time, energy and cost. Therefore, it will be correct to say that introducing compulsory dematerialisation will help run the economy with some ease.
Mandatory demating
The number of frauds with respect to physical form of shares have been were high in number; also transfer of these shares were problematic. Further, there used to be unclaimed dividend that accrued on these shares. With this amendment, there shall be a mandatory link between the bank account of the investors and their respective Demat account, which will eliminate fraud or substantially limit it, as it will allow Sebi to have easy and full access to trading information of all investors and their investments in a listed company. Having said that, the physical form of shares does not lose its value post this amendment, as the amendment by Sebi does not take away the value of any physical shares but only restricts the transfer of such shares post April 1, 2019.
So, investors who still want to retain the physical form of shares can surely do so, but Sebi will restrict investors or shareholders from transfering or selling the same unless they have converted them into Demat form. Moreover, these shares will also become illiquid, which means that, while these shares have their intrinsic value linked to the company’s stock price in the market, to realise that value the shareholder will have to convert those shares in the physical form to the Demat Form and then sell in the market and receive money in their bank account.
Limits and procedures
In case physical shares are held in the name of a deceased person, Sebi has ascribed some limits and provided some procedures which must be complied with by the legal heir of such deceased person. Accordingly, if the current value of shares is up to Rs 2 lakh then the legal heir can approach the company whose shares he has, along with death certificate of the deceased and if the value exceeds Rs 2 lakh, then the legal heir needs to appoint a lawyer to get a probate from the court to establish legal ownership.
As a matter of bitter fact, every change takes time for it be internalised, and everyone faces the brunt of it, whether it’s Sebi, investors, registrar, transfer agent or anyone who is directly or indirectly part of this existing channel. A few will be reluctant to accept the new rules, but they need to understand that shifting to Demat mode will be of utmost benefit to them. For instance, when shares held in physical form are lost or damaged, then re-issuing of the same requires time, energy and cost. Therefore, it will be correct to say that introducing compulsory dematerialisation will help run the economy with some ease.
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SEBI should be requested to issue guidelines so that phycally held shares / bonds in joint names can be converted into DMAT form on any one's name . It need not be necessarily on the first holder name . This will help large number of joint holders to convert their shares from paper holding into DMAT form
Mar 21
The moot question is to achieve 100% dematerilisation and for that please go thru my post <https://www.localcircles.com/a/home?pid=IdJ17A2eWlgtdgRQ9-009aI59iamjTpuJ_ZN-7-Trj0>;
Mar 25
While appriciating vital views, essential also to raise the basic Question o SEBI wherein lacs of Crors of rupees frauds, scames and dupping taking place every day and days together, more specifically with the help, assistance and active participations of Financial Institutions and persons working. It is like postmortem exercise that SEBI (to that effect every Authoroties ) always initiate actions afterword and also get patted for the BRAVE WORK done, ultimately to rest any recovery/petty recoveries and Balance HUGH amount to vanish in to thin air. This practive is getting adopted since decades till date. WHERE IS THE MONEY AND THE PEOPLE WHO HAD SUPPORTED TO GET THESE SCANDLES?????? Still remain mistery.
Mar 20
Small investors of 40-50 years ago, who then had bought shares on assurance of our political / Economic / Stock Exchange experts that this investment not only will give decent returns but will help in nation building. Now keeping future in mind we kept shares in joint names with one’s spouse, son, daughter (as the case may be), for safety purpose, is now a senior citizen facing problem even for opening Demat account in the names in which the shares stand. Now we are facing multiple problems such as -- 1] How to get shares demated unless SEBI modifies provision i.e. should allow dematerialisation of physical shares held in joint names to the Demat account in the first holder’s name. 2] SEBI's web should contain all company's name who at any time was in trade list of any stock exchange whether [ then ] Bombay / Calcutta / Delhi /Madras etc. etc. besides other names related / connected to this original co. which arose due to any sort of action i.e. merger / demerger / consolidation etc. so that any investor writing any name after visiting that page should get present details along-with old details of that co. [ along with who was then registrar and who is presently ] This web page should be developed in such manner which do not force seniors to feel waste of time - what I mean simple as this will help investors to pursue the case effectively otherwise we are not in a position to keep track of old investments. This web page should also contain name of those co. which vanished OR liquidated 3]Due to age and passage of time signatures is bound to differ but certainly style,manner,flow and language will match. Hence there should be certain relaxation in these type of cases. 4] Due to unavailability of physical shares SEBI should make mandatory for co. to accept affidavit on 10/- stamp paper and rest exercises should be on plain paper besides FIR should be waived and advt. if necessary then it's exp. should be borne by co. Now why I insist for above please note seniors have no so much energy to comply all - as every step requires frequent visit besides expenses [ please note those who have retired from pvt. firms do not have pension hence they have little source of income ]. Secondly 10/- stamp paper carries same weight as 500/- stamp paper. 3] Further please note that after paying all due taxes every year besides controlling our so many needs we invested in shares ignoring other investment such as Land / Gold / FD etc. keeping in mind nation building but gradually government started imposing tax on its' income [income arises due to long term share investment ] then after repeated representation small investors got relief not in all cases but over dividend income and LTCG which again last year got disturbed though I have suggested method which will garner not only more income but will also provide relief to genuine long term investors. In view of above if we try unitedly then only we can expect relief. G D Binani gd_binani@yahoo.com 7976870397 / 9829129011 Note : We all know and understand whatever stated by Mr Mohit but question is to first sort out basic problems as stated above then move towards this compulsion otherwise hard earned income which is in form of investment will become zero then honest small senior share investors will term this act as betrayal towards them.
Mar 20
All theoratically ok. What about practical problems? SEBI has no respinsibility and dumps it on investors, most of who are senior citizens?
Mar 20
