The final date to get physical shares converted to demat is just around the corner, and shareholders may not be able to sell their physical shares if they miss the dematerialisation deadline.
The final date to get physical shares converted to demat is just around the corner, and shareholders may not be able to sell their physical shares if they miss the dematerialisation deadline. Nearly seven years after the Securities and Exchange Board of India (SEBI) had made de-materialisation of shares held by promoters compulsory, the capital markets regulator in June 2018 notified that even non-promoter shareholders will have to get their shares converted to demat form by December 5. Sebi’s move was aimed at improving transparency in the dealing of securities and also to avoid instances of huge frauds in the form of claiming dividends by forged documents.
As the deadline to dematerialise physical shares draws closer, Anita Gandhi, Whole Time Director at Arihant Capital Markets, asserts that the holders of physical shares will not be able to sell the securities unless they are converted to demat form. According to Gandhi, unless there is extension or any other directive issued by the Sebi for that purpose, the physical shares may become illiquid. “One has to move to the demat regime. There is no alternative unless the date is extended,” Gandhi told FE Online.
Earlier, Ajay Garg, Director, and CEO of SMC Global Securities, had pointed out that the process of transferring physical shares into demat will become tedious if not done by the deadline issued by Sebi. “If the physical shares are not transferred by the investors before the final date, they will have to get those reissued by the registrar and transfer agents (RTA) by doing some paper formalities, including indemnity, and then get those transferred into demat form,” Garg had said.
In November, Sebi laid down some standard norms for the transfer of securities into physical mode in a bid to ease the difficulties faced by investors in the transmission process. Sebi, via a circular dated November 6, 2018, said it modified the documentation/procedure for transfer of physical securities after examination of the proposal of the Registrars Association of India (RAIN). Of the various modifications, the regulator allowed transfer deeds executed prior to December 1, 2015 to be registered with or without the PAN of the transferor.
The Sebi brought about the modification after it noticed that many transfer deeds executed prior to December 1, 2015 have not been registered due to non-availability of PAN of the transferor, the circular noted. In the case of name mismatch in PAN card with the name on share certificate or transfer deed, Sebi said the transfer will be registered on submission of either passport, marriage certificate, Aadhar card or a copy of gazette notification regarding the change in name, explaining the difference in names.