MUMBAI: The millennial investors may be oblivious to the idea of share certificates, transfer deeds, and share transfer stamps. The first baby steps into the area of dematerialisation of shares, whereby physical share certificates were moved to be stored in digital form with depositories were taken in 1996. Initially, a few heavily traded shares were moved to demat section, and then all market transactions compulsorily moved to electronic platform and dematerialised shares.
While for trading it became compulsory to do so in demat form, individuals and entities were allowed to continue holding physical shares. A limited off-market window was open for anyone who still bought or sold physical shares. Now, that would come to a stop by December 5. Securities and Exchange Board of India had in June issued a notification that no physical shares would be transferred, unless it is inherited.
At a recent shareholder meeting in Mumbai, a senior citizen raised the issue of what are companies doing about the issue of physical share certificates now that the deadline is nearing. The issue is more about what the investors choose to do, rather than what the company’s response is – companies so far have not seen to be proactive in getting their shareholders holding physical shares to convert.
But, some of the depository participants and brokerages have been sending mailers and trying to get investors to open demat account if they already did not have one, and convert physical shares into demat.
“Yes, there are still a few shares we have in physical form. We are aware of the deadline. It should not be an issue getting the transfers done before the deadline,” said Alka Agrawal, a Mumbai investor.
Shareholding declarations by the companies every quarter show the number of shares that are still not in demat form. While the numbers are not quite large, there are definitely thousands and lakhs of shares that are in physical form even among the most valuable companies.
There seems to be a legacy issue as far as most physical shares are concerned — inherited from father, forefathers and not yet been dematerialised. There is nothing to fear in case of the “transmitted” shares. Those can be transferred by the inheritor even after the December 5 deadline. However, they will not be able to sell them or get the shares transferred in the name of third parties after the deadline.
What happens to the rest of the shareholders who do not fall under the “transmission” category?
“It would be like demonetisation. You may be holding the physical paper, but they would be of no value as registrars and share transfer agents would not entertain request for share transfer after the deadline,” said a company secretary.
Dust up the papers you may have, sort out the shares company wise and get started on sending them for transfer, first.
Meanwhile, open a demat account with any of the depository participants, brokerages, brokerages attached to banks, which needs a know your customer (KYC) form like any bank account. Once your shares are transferred into your name, getting them dematerialised is a simple procedure. One needs to fill up a form and hand over the physical shares to the DP and soon, it will show up in the demat account.
This is a hassle-free way of holding shares. With a nomination available for your demat account, transmission is not a worry.
Authorities want to eliminate physical shares to prevent fraud and misuse. It is also easier for them to track the movement of holdings in demat form. Right now, demat is compulsory for all listed companies, and it may in future move to even unlisted companies.