On June 8, 2018, SEBI came up with a notification with an amendment in Regulation 40 of SEBI (LODR) Regulations, 2015, which restricts (Listed Companies) the transfer of shares in physical form. In other words, after December 5, 2018 shares will be transferred in demat form only.
Non- Applicability of amendment
This amendment is not applicable in case of Transmission (transfer of title of shares by way of inheritance/succession) and Transposition (re arranging/interchanging if the order of name of shareholders) of shares.
This amendment is only applicable in case of transfer of shares.
Process of dematerialization
The first step is to open a demat account if they already do not have one. At this stage, all the KYC verification procedures will be completed, incorporating the new name, contact details, address, email, bank account for electronic transfer of dividends and such details of the investors. The second step is to complete the Dematerialisation Request Form (DRF) for each of the physical shares, along with all the required documents.
Consequences for not complying with this amendment
If shareholders does not dematerialize there shares within the given time (i.e. December 5, 2018), then they can not transfer their shares in physical form thereafter.
Let’s understand further:
Ques 1. Can shareholders hold their physical shares after Dec 5, 2018 also?
Ans. Yes, after Dec 5, 2018 also, shareholders can hold their shares in physical form. It only restricts the transfer of shares.
Ques. 2. After Dec 5, 2018 shareholders can convert their shares in demat form?
Ans. Yes, after Dec 5, 2018 also, shareholders can convert their shares in demat form.
Ques. 3 Can physical shareholders transfer their shares after Dec 5, 2018?
Ans. Yes, shareholders can do so, only after the shares are dematerialized.
Indeed, to minimize the fraud in relation to transfer of shares, to increase the convenience, safety of transactions for investors, SEBI has came up with such amendment. But on the other hand, Shareholders are facing problems in converting their shares in demat form inspite of repetitive reminders by their respective RTAs. After this compulsion, they are only left with two options, either to go for dematerialization or stop transferring their shares in physical form after Dec 5, 2018.
Author: C S Ekta Maheshwari is the Author of this article and is a Practicing Company Secretary. The Author can be reached at [email protected]