How to Convert Physical Shares into Demat
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The stock market is at its lifetime highs. If you own physical shares, then this would be the best time to convert physical shares into demat form. This is because physical shares cannot be traded in the Indian stock market anymore.
It was introduced in the year 1996. Before this, investors used to trade physical shares. But physical share trading was risky and time-consuming. Dematerialisation mitigates all those risks and limitations involved in physical share trading.
Let us quickly take a look at how to convert physical shares into demat.
In this article:
- Introduction to Demat
- Process of Converting Shares into Demat
- Documents Required to Open a Demat
- FAQs
What is Dematerialisation?
It is the process of converting physical securities into electronic form. Shares can be held physically as share certificates. However, to transfer or sell them we need to convert them into demat. As per the Securities Exchange Board of India (SEBI) only shares in electronic form can be sold or transferred.
How to convert physical shares into demat form? – The process
Here’s a quick checklist for converting physical shares into demat form
1. Opening a demat account
Opening a demat has become easier than ever with paperless and online account opening facilities. Here are points to keep in mind before account opening for converting physical shares into demat form:
- Demat account should be in the name of the shareholder
Demat account should be opened in the name of the share certificate holder only. The owner of physical share certificates will receive the share in demat account. The shares in demat account can then be sold or transferred.
- The order of holding remains same as physical shares
The first holder and second holder on the form should remain same as they were on physical shares. So basically, the sequence of owners should remain the same electronically, as it was physically.
Documentation required for opening a demat account:
1. Identity proof
- PAN card – This is mandatory for every investor.
- Unique Identification Number (UIN) – Aadhaar card or Passport or Election card.
2. Address proof
- Ration card with address
- Water bill in your name
- Telephone bill in your name
- Electricity bill in your name
- Bank statement
3. Bank proof
- Personalized cancelled cheque
- Bank account statements - past six months
- Passbook
4. Income proof
- Salary slip
- Personalized cancelled cheque
- Bank account statements - past six months
- Passbook
5. Passport size photographs
Preparation of these documents will get you a step closer to converting physical shares into demat form.
We need to check the current market value of the company whose share certificates are held by us. It makes sense for you to convert the physical shares into demat only when:
- a company is not delisted from the stock exchange.
- The company is performing fairly well.
2. Filling form & surrendering share certificates
Moving on to the conversion process. Now that you know which share certificates are worth converting into demat form. Place a request for conversion of physical shares into demat form by submitting:
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- Filling DRF - Dematerialisation Request Form
- Defacing physical share certificates - surrendered for dematerialization.
- Note that every company needs a different DRF. Therefore, use separate forms for share certificates of different companies.
- Defacing every share certificate by writing surrendered for dematerialization is equally important.
- An acknowledgment slip is received for the surrendered shares. These physical shares are then dismissed. Demat account then gets credited with electronic shares. Now the securities can easily be sold and transferred.
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FAQs
- What are the benefits of demat account?
- No risk of misplacement or theft.
- Minimal paperwork as compared to physical shares.
- Quick and easy execution for sale, purchase and transfer of securities.
- Is there a process to reconvert securities into paper form?
Yes. With the process of re-materialisation, you reconvert the electronic securities into paper form.
- Does dematerialisation of physical share cause any change in rights of a shareholder?
No, the rights of shareholder in demat form remain same as that of the physical shares.
- What should one do incase their share certificate has got torn or worn out?
Send a request to issue duplicate share certificate along with copy of torn or worn-out share certificate.
- What are the instruments that can be converted into demat form?
All equity and debt instruments –