In earlier days people use to buy and sell physical paper shares. Physical paper shares are issued by the company in the investors name. But investors hold shares recently in the form of electronic demat. The investors are the real owners of the company. It has been really difficult to redeem physical paper shares today as there is a sequence of process involved in dematerialization of physical shares.
Physical paper shares
It is a form security issued by the company to the investor who pays the share value and buy it. It is issued in earlier days
Demat means converting the physical shares to electronic form so that can be traded in stock exchanges.
Remember that you can only sell those paper shares was companies are still existing. If the companies closed or shut down when there is no value of share certificate.
It is the account which is opened in the name of investor who wants to demat shares for longer holding or for converting physical shares to electronic form for the purpose of selling or further longer holding of the share certificates. This account is opened by the depository participant.
They are the third-party financial institutions, banks and brokers who deal with securities including shares, debentures, mutual funds, commodities etc. they are legally bounded with stock regulators and the stock exchanges for trading securities. They act as a mediator between the investor and the company from which securities are purchased. They work on commission basis.
It is an account offered by the depository participant so that you can buy and sell shares online immediately. It is an account where shares are bought and sold in the financial market. Trading account only stores short trading activities. But once a particular share is bought in trading account and is not sold yet it moves into demat account for long-term storage.
Benefits offered by depository participant
Depository participant help the investors and the company to create a platform where securities are being traded.
They help the investors to offer trading account and demat account services. Other accounts can be added depending upon the securities traded.
It is easy to sell physical shares through depository participants. As they do all the procedures involved in it.
Conduct training and awareness programs which will benefit the investors
Link the savings banks account with trading and demat account
Call To trade,SMS trading,mobile trading and Internet-based trading platforms and softwares are given by depository participants to the investors who really wants to trade securities.
Investors can give certain instructions to the depository participants to act on behalf of them. For example if the investors are abroad and wanted to purchase a security listed in the home country than the investor can call the depository participant representatives and they can buy on half of the customer.
Effective reports and detailed analysis of a particular company
Excellent trading platform with expert guidance.
Dematerialization Of Physical Shares
If you want to dematerialize physical shares you have to follow the procedure laid down. You have to search best and cheap depository participants to get associated with them. There are many depository participants but choosing the best and the cheap matters a lot.
Once you have selected a depository participant then you have to keep certain documents which you before you visit the depository participant office. Documents includes your share certificates originals, a copy of original share certificates, identity proof as it matches your share certificates names and signature and some photographs. Please call your depository participant and get the details of other documents needed instead of going there and wasting time.
Now you have the visit the depository participant office and ask them for the dematerialization of physical shares. They will ask you to open an account that is three in one account which includes savings bank account, trading account and the demat account. Some depository participants offer free account and some charge.
Fill out the account opening form and give your ID proof and photos. Some brokers may ask cancelled cheque for verification of bank. So it is advisable to carry bank statements and cheque-book for the account to link.
After filling account opening form you have to fill signatures. Make sure that your signature matches your share certificates and your documents provided. Signature mismatch can delay your process so be careful.
Now it takes maximum up to 10 to 15 days for demat account to be opened. Remember if you already have a demat and trading account then you can save 10 to 15 days if not you have to wait.
You to come after 10 to 15 days once your demat account is active. This is your second visit to the depository participant. Make sure you carry all the documents with the originals of share certificates , ID proof and bank statements with cheque-book.
Now request the depository participant to dematerialize your physical shares. Hand over the original share certificates to the depository participant for surrendering the shares along with shares document like dividend copy if you received any or bonus or split share certificates if any along with letters and communications that you have received to your home address from the company which you hold.
It takes up to 30 days or more for depository participant to dematerialize your physical shares. Among these 30 days the depository participant contacts the company registrar for the verification of physical shares. The company verifies each and every document submitted by you to the depository participant including the signatures. If any misunderstanding between the names, signature or transfer of names or change of name you provide legal affidivaite it may delay the process more. Even if you have lost the share certificates the depository participant requests the company further issue of duplicate share certificates at the time you to file a complaint with the police for lost of shares and a copy of police FIR should be sent to the company registrar. It may also delay the process for about 5 to 6 months depending upon the process.
If everything is clear then dematerialization process takes up to 30 days or less. But if it is complicated it may go to years a something is missing.
The clear and easy dematerialization process of physical shares takes 14 days for demat account to be activated and 30 days for dematerialization totalling up to 44 to 45 days in easy circumstances if you have followed all the procedures and have clear list of documents without any mismatch.
Once your stocks are dematerialized than the depository participant can sell the shares or investors themselves can sell shares using demat account.
Demat account charges are levied for the dematerialization. It is the small amount which is levied on the total transaction. Annual demat charges also apply as per the plans opted by the investor.
What Does Dematerialization Mean?
The process of conversion of physical shares to electronic form(demat) is called Dematerialization.
There are enormous benefits of converting your physical shares into demat form.
The process of dematerialization helps you to store large number of securities online and sell whenever you wanted
Easy to maintain and flexible
Liquidity of stocks is easy
Prevents lost or stolen as depository participant maintains your demat account
Flexibility to sell any time
Links your savings bank account for withdrawal of money after the sale
Even a single share can be sold in a demat account unlike physical shares sold manually.
The cost of storage and stamping is really less when compared to physical shares transaction.
I have simplified this article by providing clear-cut instructions on dematerialization of physical shares. If you find it really simple and easy do share your comments. If you have any more suggestions do let us know
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