Article explains What is Dematerialization, Benefit of Dematerialization Shares and Process of Dematerialization of Shares.
In India, the use of physical share certificates has rapidly decreased with the advent of demat accounts and computerized share trading. In fact, firms must only issue shares in their dematerialized form and not in the form of physical share certificates, as required by the Securities and Exchange Board of India (SEBI). You’re undoubtedly asking yourself, “What is dematerialization?” at this point. To learn everything there is to know about the idea of sharing dematerialization, keep reading.
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What is Dematerialization?
Dematerialization of shares is the process by which a company’s physical share certificates are transformed into an electronic format. These dematerialized shares are subsequently kept in a depository-opened online demat account. Dematerialization of your shares is necessary in the present stock trading environment in order to sell or transfer your shares to another account.
Let’s quickly review some of the benefit of dematerialization shares now that you know the definition of dematerialization.
1. Increased safety: Since dematerialization involves converting physical shares into electronic ones, you don’t have to worry about your share certificates being damaged, mutilated, lost, or stolen. All of your shares can be safely kept in one demat account that is accessible from practically anywhere in the world.
2. Greater security: Forgery, fraud, and duplication were common while actual share certificates were in circulation. However, none of these situations are feasible with dematerialized shares.
3. Facilitation of quick transfer: With actual share certificates, it would normally take days to transfer shares from one person to another. But share transfers are now incredibly simple and virtually instantaneous thanks to share dematerialization.
– The dematerialization of physical shares is a straightforward and simple operation. And it just takes a few days to finish. Here is a quick description of how shares are dematerialized.
– To begin with, you must use a depository participant to create a demat account with the depository (DP). The stockbroker with whom you hold a trading account typically serves as both a DP and a broker.
– After opening a demat account, you must deliver the physical share certificates you already possess to your DP together with a properly completed Dematerialization Request Form (DRF).
– If you possess stock in more than one firm, you must submit a properly completed DRF for each company together with the appropriate share certificates.
– Your DP will carefully review the paperwork and the securities after obtaining the DRF to make sure everything is in order.
– You will be given a Dematerialization Request Number (DRN) as an acknowledgement if the DP is pleased with your request.
– Your request is subsequently forwarded by the DP to the company’s Registrar and Share Transfer Agent (RTA).
– Once your request for dematerialization of physical shares has been approved by the company’s RTA, the physical share certificates are transformed to electronic form before being destroyed.
– Finally, your demat account is credited with the now-dematerialized shares, which you may either sell or transfer to other accounts.
Conclusion
Share dematerialization of physical shares is simple and takes only a few minutes, as you can see from the previous description. Dematerialization of physical shares has made the formerly complicated process of trading in shares much simpler. It has greatly aided in the expansion and public acceptance of share trading and ushered in a new age of electronic share trading.
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