Since MCA as well as SEBI both have decided that except in case of transmission or transposition of securities, requests for effecting transfer of securities shall not be processed unless the securities are held in dematerialised form with a depository. This measure came into effect from April 01, 2019.

For everyone’s information  I am not only in favor of demat, but also want to have all physical shares converted into demat. For this all concerned authorities not only consider practical aspects but also initiate suitable rectifications otherwise small senior stock investors will never be able to utilize their invested capital in their lifetimes.

I draw your attention towards media reports appearing on 31st March,’19 that still there are 3.33 lakh crores physical shares which is equal to 2.3% of the total listed shares’ market capitalisation and as per my assessment a major part of this is lying with small senior stock investors.

All senior small shareholders want to dematerialise their physical shares but they are not able to do so due to certain problems which are not in their control. Hence all concerned authorities are requested to provide a solution after understanding their problems in order to get wiped out all physical shares from the market i.e. 100% dematerialisation.

On 5th of last month there was an article titled “Can physical shares be accepted in buybacks, companies ask Sebi  by  Burugula – Editor, The Economic Times  but surprisingly it covered only physical shares of listed companies as certain companies asked this answer from SEBI otherwise this matter is also relevant to unlisted companies which is being handled by MCA.

As you all know there are physical shares related to unlisted companies too which is being dealt by MCA & surprisingly small seniors also hold these which came in their possession due to management policy who first floated Public Issue and after listing got delisted and as a result small senior shareholders are in trouble.

Moreover in that article experts like Mr.Anil Choudhary, partner, Finsec Law Advisors said this constraint should not apply to buybacks

1] “When the regulator has allowed investors to hold shares in physical form, you cannot force investors to convert their shares into demat.”

2] “Buybacks cannot be regarded as transfer of securities and accordingly, the restriction on physical transfers cannot be applied in case of buyback,” said Vinita Nair, partner, Vinod Kothari & Company.

Now I hereby mention some major hurdles which these senior small stock investors are facing —

1] Due to frequent transfer they have missed not only so many important information but failed to comply certain formalities related to their investment. Such as–

  A] Their physical scripts either lying in parental place OR some time at children’s place OR not delivered to them.

  B] Due to change in name OR change in denomination OR other reason arising due to merger/demerger/consolidation etc. scripts with us not valid for demat

  C] Due to change in Co.’s  address  arising as explained in Clause 2 above they feel helpless

  D] There are changes in RTA too  i.e. old RTA either left OR replaced due to change in management

  E] There are companies who got converted from public to Private Ltd. due to ownership change

  F] Absence  of joint holder due to so many reasons

Due to any of the above reasons, if dividend remains outstanding seven consecutive years physical shares along with total dividend amount gets credited to IEPF even though investor has not surrendered his physical holding .

SEBI  should ask all those companies, who have transferred to IEPF to provide all sorts of help so that the legal owners do NOT suffer ( as completion of formalities is tough ) otherwise small seniors investors will never be able to complete the refund process.

Hence it is desirable that all authorities should revisit / reassess to this provision  i.e. have a thorough consultation with all constituents

2] There are companies who after strict direction from SEBI started demat process i.e. before that their shares were not on demat platform

3] There are companies who are not on CDSL then our NSDL DP is unable to demat similarly if not on NSDL then not possible with CDSL DP.

4] A married woman, after the death of her father, finds that her father had bought shares in her name long before she was married. The woman communicates with the Company and RTA and faces a tough task as both ask for various documents and after submitting the documents inform that the shares are with IEPF (and are still in her maiden name). This is a classic case, where there is no mention of a likely hood of such incidence, and hence neither SEBI has any answer nor the Company and/or RTA wants to act. So the shares and dividend are sent to IEPF. Are the Shareholder only responsible for running from pillar to post for repeated demands from Companies and/or RTAs ?

5] Judging loss on sale after incurring demat charges they prefer not to opt for demat hence high DP charges is also a hurdle i.e. not economically viable. As such authorities should revisit and amend suitably DP charges.

6] There are a number of companies which got delisted after listing over Stock exchange and in these type of cases Small senior Shareholders are facing tremendous trouble. MCA authorities should provide such an exit route which enable small Shareholders to realise their cost otherwise they will not be able to overcome such problems.

7] It is very difficult to search out these delisted companies’ address whereas IT department is asking to convey their PAN No. etc. which is also worrisome  for we seniors. Moreover I do not find PAN no. of even listed companies over BSE site. Further these [ delisted ] companies do not return shares once they get possession of shares. Hence this requires some effective solution.

8] Share holder has changed the residence and is staying with his/her married daughter, for which there is no address proof available. Although the company and /or it’s RTA have the details of share holder’s either PAN or Bank account or email or Mobile number or Aadhar details, they are insisting for the share holder to get the address proof and refusing the transfer.

9] Shareholder has changed the bank account, but the PAN and/or email details are available with the company and/or RTA, which is ignored and transfer is refused.

10] Shareholder has lost the certificate, has requested for a duplicate certificate and for that the company sends a questionnaire to get details as to how the share certificate was lost. Now if it is signed by the first share holder (as the others are staying in other cities), company and /or RTA rejects the request.

Hence considering all above authorities should relax this transfer ban —

1] Transfer for eliminating joint names should be allowed so that seniors get their holding converted into demat a/c style alternatively

2]One format should be introduced which should be so drafted which once submitted duly signed by all joint holders should be made sufficient for converting physical into electronic  form in desired style.

In simple words authorities should ensure so that  small senior stock investors are not required to obtain repeated signatures from joint holders.

I will also suggest authorities can make it mandatory for companies [ now onward ] not to return transferred physical shares rather effect credit to desired demat a/c. which in turn eliminate a good number of physical shares.

I trust authorities after examining all points deeply will come out with an easy workable  solution which in turn provide relief to all i.e. to shareholders as well as authorities themselves besides companies.

Now I urge all the enlightened readers to pass your opinions / suggestions to authorities so that this problems gets sorted out in an amicable manner as ban on transfer will complicate problems hence our joint efforts is necessary.

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2 Comments

  1. Jeewat Rai says:

    There was an article in the economics times about a week back that all the companies must give facility to the shareholders so that they may get their shares dematerialized.

  2. MAHENDRA K GHELANI says:

    I have very frustrating experience in dealing with Karvy and other agents employed by Companies for undertaking the task of conversion. Their approach is adversial and obstructive rather than assistive or co operative. Shareholder is harassed by having to repeated undergo requirements smacking of mindless beaurocracy and even indicating vested interest in harassing so that the troubled shareholder ultimately takes recourse to agents or purchasers of such physical shares who can smoothly complete the process, as is happening in case where unclaimed dividends are deposited and are to be retrived.

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