Dematerialization of Shares in India

The process of converting the physical share certificates of a company into electronic form is known as the dematerialization of shares. Then these shares are converted deposit into an online Demat account which you opened with an online broker.

To trade in the current stock market, having shares in an online demat account is important to sell or transfer the shares from one account to another. 

In 1991, the process of dematerializing shares has been started, and before that physical formats were used that were challenging to maintain over time. With the implementation of dematerialization, the process of buying and selling shares becomes easy and smooth.

What are Unlisted Companies?

These companies do not have any of their securities listed on recognized stock exchanges such as SEBI. There are different public and private companies that are not listed on the stock exchange, for example, Tata Technologies, Razorpay, Ola, and Swiggy. These companies are not listed on any stock, so they cannot sell their company's shares to the public. 

What does it mean to dematerialize your securities?

Courtesy of this amendment, unlisted public companies are required to facilitate the dematerialization of their securities. This has to be done in coordination with the depositors of the company and a share transfer agent. A share transfer agent is someone that the unlisted company has to appoint. It is this agent that is going to provide the public company with the Registrar and share transfer services. If there are any issues with dematerialization, the IEPF Authority is going to be the one to handle it.

Registrationwala is a team of professionals with a team of Company Secretaries, Chartered Accountants, and other professionals. Our acumen pertaining to company registration and compliance services makes us the perfect choice to be your Registrar & Transfer Agent.

Benefits of Shares Dematerialization in India

The unlisted public companies will be able to enjoy the following perks according to the MCA:

Reduced Vulnerability

As the certificated will be dematerialized, the risks that arise due to the vulnerability of the physical copies, like loss, theft, fraud, and mutilation, will be eliminated.

Increased Transparency

Transparency will increase. This further will help with an improved governance system for the corporate industry. As a result, be-nami shareholdings and other such malpractices will be curbed.

Stamp Duty Exemption

There will be an exemption with payment associated with stamp duty.

Digitized Portfolio

As the entire equity portfolio will be digitized, the transfer and other matters like the pledging of securities can be dealt with easily.

Eligibility Criteria for Dematerialization of Shares in India

Following is what constitutes the eligibility criteria to dematerialize the shares:

• The share distribution should not be disputed. 
• The application should be filed on time. 

Documents Required for Dematerialization of Shares in India

The following information & documents are required for the dematerialization of shares:

• Certificate of incorporation
• Director IDs
• Physical copies of the shares
• Memorandum of Association

Process for Dematerialization of Shares

The process of share dematerialization is a simple one. The process is as follows:

• First, open a Demat account and choose a Depository Participant (DP) that can offer Demat services.
• Before converting shares, fill out the Dematerialization Request Form (DRF) and submit it along with share certificates. Note: ‘Surrendered for Dematerialisation’ needs to be mentioned.
• DP will process this request, once the request is approved, the physical form will be destroyed and confirmation will be sent to the depository.
• Once it is all done, the holding of shares will be reflected in the investor's online account.
• The process of dematerialization will take 15 to 30 days to be approved.

Our Assistance in filing the Dematerialization of Shares in India

We at Registrationwala provide end-to-end solutions for filing Dematerialization of Shares. We provide you with Registrar and Transfer Agents. Our services include:

• Collection of information and starting the process
• Drafting the application
• Reviewing the draft and making changes if necessary
• Providing you with the confirmation receipt

Registrationwala.com is a leading legal consultancy firm providing comprehensive services relating to the Dematerialization of Shares.

Contact us now if you seek the dematerialization of shares.

FAQs

Q. What do you mean by the dematerialization of shares in India?

A. The 3rd amendment rules have become mandatory for all unlisted public companies to issue and transfer their shares only in dematerialized forms. If you have incorporated your company as a Public Company, this compliance is necessary from 2nd October 2018. This step is to enhance the transparency of the company's function, enhance the protection of the investors, and elevate the corporate sector's governance.

Q. Briefly explain the process of Shares Dematerialization in India.

A. Dematerialised Share process: The process of share dematerialization is simple. The process is as follows:

• Apply for share dematerialization at the MCA portal with the required documents
• The shares will be dematerialized once the application is accepted

Q. Can the unlisted shares be dematerialized as per the Companies Act?

A. Yes