The aim of the SEBI amendment is curbing fraud and manipulation risk in physical transfer of securities by unscrupulous persons, apart from improving ease, convenience and safety of transactions for investors.
If you are holding shares of some listed companies in physical form, you will have no choice but to convert them to demat form compulsorily if you wish to sell the securities, as the Securities and Exchange Board of India (SEBI) has amended relevant provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 to disallow listed companies from accepting request for transfer of securities which are held in physical form with effect from April 1, 2019.
The effective date was earlier set by the market regulator as December 5, 2018 and the extension of the deadline provides investors additional time of about three months to dematerialise their securities.
Although, you will be continue to hold shares and other types of securities in physical form even after April 1, 2019, but you will not be able to lodge the shares with a company or its registrar and transfer agent (RTA) for further transfer.
The aim of the amendment is curbing fraud and manipulation risk in physical transfer of securities by unscrupulous persons, apart from improving ease, convenience and safety of transactions for investors.
All the investors who are holding shares and other securities in physical form, should, therefore, open a demat account at the earliest and submit request for dematerialisation of their shares in order to protect the liquidity of the shares.
However, after the end of SEBI deadline, only the requests for transmission and transposition of securities in physical form, will be accepted by the listed companies or their RTAs.
Transmission happens upon death of any or all shareholders. So, in case of demise of any or all shareholders, transfer of the share in the name of legal heirs will still be possible in physical form. But once the transmission is done, surviving members have to convert the securities in dematerialised form for further transfer.
On the other hand, transposition means change in ownership pattern. For example, change in combination from A & B (in this order) to B & A or from A & B & C to B & A & C will still be possible in paper form even after March 31, 2019.
However, investors holding non-listed shares in physical form will be able to sell/transfer the shares as they wish even after the deadline.