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An Overview of Dematerialization of Shares

In the early days, the shares we bought used to be in paper form- difficult to manage and process. Physical shares are prone to mishandling, loss, or theft. The concept of Dematerialization of shares was introduced to solve this fundamental problem. Dematerialization of Shares refers to a process of converting physical shares into their digital version. The process of shares’ digitization starts with the opening of a Demat account with a depository participant (DP) followed by the filing of the prescribed application. In the status quo, the Dematerialization of shares is mandatory for share trading.

What are the benefits of the Dematerialization of shares?

Share Dematerialization ensures an array of benefits for the shareholder. Some of its prominent advantages are as follow:

Heightened safety

Since Dematerialization provides for the digital conversion of physical shares, the chances of mutilation, damage, theft, or loss would cease to exist. Security holders can use their Demat account online from anywhere to manage their digital form of securities. Ease of use with increased security provides a hassle-free experience to the security holders.

Seamless security

Physical shares are prone to misuse and damage. But Dematerialization has solved this fundamental problem by allowing shareholders to turn their physical certificates into their digitized version, which is high-secure-thanks to the end-to-end encryption of the Demat platform.

Availability of prompt transfer

Transferring physical share certificates to another party is a cumbersome and time-consuming process. However, through Dematerialization, shareholders can ensure the paperless transfer of their shares in no time.

How to Proceed for Digitization of Physical Shares?

Shares digitization is not a complicated process provided you stick with what is required. Here is the generalized process concerning the Dematerialization of shares. We suggest you opt for expert help if you are time conscious and have no intention to deal with process complexities.

  • Open the Demand Account via a recognized depository participant (DP)
  • File the application form-Dematerialization Request Form (DRF) with the respective DP and furnish the required annexures including a physical copy of the shares. One application serves one share type. If you own different shares of different companies, separate application filing shall come into effect.
  • The DP will vet the application and attested annexure for possible errors.
  • Next, DP will accord the Dematerialization Request Number (DRN)
  • The request for share dematerialization shall be shared with the Registrar and Share Transfer Agent.
  • The registrar and Share Transfer Agent shall perform an in-depth review and accordingly accord their approval for the share’s digitization
  • The physical will be converted into electronic form and then credit to the applicant’s Demat account. Post-conversion, the physical shares will cease to exist.

An Overview of the Dematerialization Request Form

The dematerialization request form is the widely-used application form to be filed with the recognized DPs for shares’ digitization. It requires the applicant to fill in an array of information such as:

  • Participant’s name
  • DP id
  • Type of securities
  • Numbers of securities
  • Client ID
  • Company name
  • Holder name
  • Quantity to be dematerialized
  • Face value
  • Details of Securities

What Do you understand by the term Depository?

A bank preserves your money, and similarly, a depository takes care of your financial assets via a depository participant against some charges. The depository is liable to keep your financial assets like stocks, bonds, mutual bonds, etc safe. Presently, our country has two main depositories namely- CSDL (Central Depository Services Limited) and NSDL (National Securities Depository Limited). Take note that these bodies offer the facility of account opening via linked depository participants only.

What do you understand by Depository Participants?

Essentially, a depository participant is an avenue like a bank that takes care of incoming assets and performs transactions. In place of money, a depository participant deals with the management concerning securities and their transactions.

Overcome irrelevant paper works

In the early days, trading attracted massive paperwork that complicates the entire supply chain. With a depository participant, the undertaking relating to paper works and transactions is handled online.

Overcome fraud

Since DP processes are now executed online, they are safe and free from any potential mishaps including theft and loss.

Rapid Processes

Almost all DPs nowadays operate online with high-speed networks to ensure top-tier asset management and trading. This leads to no more lethargic trading scenerios that take hours and even days to complete.

Managing Bulk

Managing bulk investors become easier with depository participants that operate online.

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How can Corpbiz help you with the Dematerialization of shares?

Dematerialization of shares is a simple yet delicate process that required undue attention from the shareholders. The novices or new users may find it complicated to deal with. We understand this fundamental problem and therefore provide top-tier and hassle-free service of Dematerialization of Shares. Here’s what we can offer in this regard.

  • Opening of Demat Account with the Depository
  • Filing and Submission of Dematerialization Request Form (DRF)
  • Arrangement of mandatory annexures and Documents
  • Handling multiple applications in case an applicant owns shares of different companies
  • Liaison with Depository Participants (DP) at each step of application processing
  • Keeping track of application progress.
  • Securing Dematerialization Request Number post successful vetting of application
  • Track progress in the phase where a request for Dematerialization makes its way to the Registrar and Share Transfer Agent (RTA).
  • Keeping track of the phase where the request reaches the final stage where RTA proceeds for shares digitization and omission of physical shares.
  • Informing clients about the application progress at each step till the completion of the Dematerialization process.

Frequently Asked Questions

Share trading and processing are now compulsorily executed online. Those with physical share certificates must file applications with DP for share digitization to qualify for trading. Long story short, Dematerialization is a mandate for all physical securities.

The Depository Participant Identification refers to a unique ID allotted to the DP by the NSDL and CDSL. The Demat account number usually comprises customer ID and DP ID.

There is no definite timeline for the completion of the dematerialization process. However, in most cases, DP takes around 15-30 days to process the application.

Dematerialization is the process of digitization of physical share certificates. It has enabled authorities and security holders to entirely switch to a paperless approach when it comes to security management. Dematerialization is safe and virtually perpetual owing to a high level of security.

DRF stands for the dematerialization request form. It serves as a standardized application form required to file with the DP for shares' Dematerialization. The application processing timeline varies in accordance with the number of shares to be dematerialized.

For the digitization of physical securities, one must file a prescribed application (Demat Request Form) with the DP and submit the same with share certificates requiring Dematerialization. The applicant has to file a separate DRF for each ISIN.

A DP ID is a unique 8-digit number assigned to the respective depository participant.

“Share transfer agent” refers to an individual who takes care of the record of the security holder and deals with matters concerning the transfer or redemption of securities.

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Sarfaraz Ahmed Bangi

From Mumbai Recently Purchased @Private Limited Company