Physical share certificates were once standard, but they carry attendant risks: loss, theft, damage, and long, cumbersome claim procedures. Today, stock market transactions take place purely in electronic form, with companies refusing to process transfers unless the shares are held in demat account form. For many investors, converting certificates is the only way to unlock value from old holdings that may have appreciated significantly over the years.
Opening a demat account
First, one needs to have a demat account with a depository participant that is connected with either NSDL or CDSL. Most investors open it through a stockbroker or a bank offering services in trading and demat. One has to complete all the formalities related to KYC, including PAN, proof of address, and identity. No new demat account need be opened if one already has a demat account.
On activation, the participant will be issued a Dematerialisation Request Form commonly called a DRF with instructions on how to submit certificates.
Submitting physical certificates
Each certificate has to be presented in original and the names should match exactly as appearing in the demat account. Any spelling variations or difference in initials may have to be supported by relevant documents such as affidavits or proofs of name changes. The investor has to complete the DRF, indicate the certificate numbers and distinctive numbers, strike off "Surrendered for dematerialisation" on the certificate.
The completed form and certificates are then handed over to the participant. Some require the signatures to match the company’s records, so discrepancies in the signature may lead to rejection unless verified. Joint holders must sign in the order recorded on the certificate.
Verification and processing
Once the participant receives the documents, they fill in the details into the system and send the physical certificates to the registrar and transfer agent of the company. The registrar checks whether the certificates are genuine, whether they have been reported lost or stop-listed, and whether the holder details match their records.
If everything is in order, the registrar confirms the dematerialisation request electronically. The shares then show up in the demat account of the investor usually within two to six weeks. Timelines may vary based on registrar processing and any clarifications required.
When complications arise
Many certificates are very old, having been issued decades ago, and problems abound. Name mismatches, missing signatures, transmission issues after the death of a holder or lost certificates can delay the process. In some cases, investors may need to complete transmission formalities, obtain duplicate certificates or provide indemnity bonds.
Shares with company mergers, splits, or delisting histories may require additional verification. Patience is often required, especially when dealing with companies that no longer exist or have gone through some corporate restructuring.
After dematerialisation
Once the shares reflect in the demat account, they can be sold on the market like any other holding, subject to liquidity. Investors can also pledge them for loans or transfer them electronically without paperwork. Corporate benefits such as dividends, bonus shares or rights issues are credited directly to the linked bank or demat account.
Takeaway
While converting physical shares to demat form may be a long and cumbersome process, there is no way around it to utilize the existing value in them today. A functional demat account, proper documentation, and carefully submitted applications should see most investors through the conversion with their holdings safe and tradeable.
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