What is Dematerialization?

Dematerialization is the process of converting physical share certificates, mutual fund, bonds or any other financial instrument into electronic form. An Investor who needs to dematerialize his/her shares needs to open a demat account with Depository Participant (DP) registered with NSDL and /or CDSL. Typically – stock brokers.

These physical shares are then submitted by the investor and in return he gets electronic shares in his demat account. Click here to know – how to open trading / demat account. Once your demat account is active, you will fill a request form and submit it to your DP. The shares are then credited to your demat account in electronic form within 15 days.

Detailed Procedure for Dematerialization of Shares

  • To convert the physical shares into demat form; investor needs to submit a request to the DP in the Dematerialization Request Form (DRF), along with the certificates of securities to be dematerialized. Before submission, on each certificate, mention the words: “SURRENDERED FOR DEMATERIALISATION”.
  • The DP needs to process this request along with the share certificates and forward DRF and Share Certificates to the company’s Registrars.
  • Once the request is approved, a confirmation of dematerialization will be sent to the NSDL/CDSL.
  • Post this, a credit in the holding of shares will reflect in the investor’s account electronically.

How to Dematerialize Shares of Companies Which Get De-Listed, Merged, De-Merged, Suspended

Delisted Shares cannot get dematerialized

Many investors have in their portfolio shares of companies that have delisted from the stock exchanges. The stock exchanges have made its mandatory for such companies to accept share buy-back requests for at least one year after delisting of shares. But after one year, investors can do nothing with their delisted shares held in physical form. They however remain shareholders and are entitled to receive all dividends and bonus / rights shares issued by the company.

Companies which are Suspended

Suspended companies shares can get dematerialize by following the above process.

Merger, Demerger or Split of Company

In case the company gets merged, de-merged or does a share split, investors need not surrender the old certificates as they stand cancelled. In such cases, companies must have issued new share certificates to the existing shareholders in their records. You need to provide new share certificate for the purpose of dematerialization. In case you have not received your new share certificates, please contact the company or preferably their registrars.

Company has changed its Name

Often companies change their names and this can confuse shareholders. So before sending the demat request for such shares, one must check the new name of the company. In such cases, one needs to submit the new share certificates which the company has issued. Again, in case you have not received your new share certificates, please contact the company or preferably their registrars.

Private/ Public Company’s Shares

A private/ public limited company can also opt to get its shares dematerialized. Typically, this will be done only in cases where there are many shareholders in the company and where the company wants to give ease of transferability to its shareholders.

What makes the process of dematerialization of shares complicated is the way in which the share certificates are held (ownership), which, in turn, determines the ease or difficulty of the demat process.

A couple having shares certificates of companies, some in their individual names and some jointly held.

To transfer the share certificates into your demat account, name, its order and the type of ownership of the demat account should match with your share certificate. Thus, to transfer jointly held share certificates, you are required to open a new joint demat account to get the jointly-held shares credited into it.

Note – Jointly-owned shares can be transferred to a jointly held-demat account even if the sequence of the holders’ name in the certificates is different. For example – if husband is the first holder in the demat account but second holder in some of the share certificates, then those shares can be transferred to this account by submitting Transposition Request Form (TRF), along with the Demat Request Form (DRF) and the share certificates to the DP.