SEBI has recently amended relevant provisions of SEBI (Listing Obligations and Disclosure Requirements)(Fourth Amendment)Regulations,2018 to disallow listed companies from accepting a request for transfer of securities which are held in physical form with effect from April 1, 2019. The shareholders, who continue to hold shares and other types of securities of listed companies in physical form even after this date, will not be able to lodge the shares with the company for further transfer. They will need to convert them to demat form compulsorily if they wish to effect any transfer. Only the requests for transmission and transposition of securities in physical form will be accepted by the listed companies.
This amendment will help in curbing fraud and manipulation risk in the physical transfer of securities by unscrupulous persons. Further, with shares held in demat form will improve the ease, convenience, and safety of transactions for investors.
All the investors who are holding shares etc. in physical form, should consider opening a demat account at the earliest and submit a request for dematerialization of their shares in order to protect the liquidity of the shares. Utilize this mandate to demat them so you and your family can actually make use of the wealth locked in them.
The earlier deadline to convert shares in dematerialized form was with effect from December 5, 2018. Subsequently, SEBI had received representations from shareholders for extension of the date of compliance. In view of the same, the deadline was extended and the aforesaid requirement of transfer of securities only in demat form shall now come into force from April 1, 2019.
FAQs for Mandatory Dematerialization
1. What will happen if I don’t demat my physical shares?
In this case, you will not be able to sell or transfer your shares after April 1, 2019. You will have to wait for demat of shares before being able to sell/transfer them.
2. In case of demise of a shareholder holding physical securities, what could be the procedure to transfer those physical securities (nominee registered / nominee not registered)?
Transmission and transposition of shares held in paper form will continue to be allowed. Transmission happens upon the death of any or all shareholders. Transposition means a change in ownership pattern; eg. From combination A & B (in this order) to B & A or from A & B & C to B & A & C. Though these will still be possible in paper form even after April 1, 2019, conversion to demat is still suggested for many other benefits it offers.
3. What is to be done by the investors holding non-listed shares in physical form?
Investors may continue holding non-listed shares in physical form. They will be able to sell/transfer the shares as they wish even after April 1, 2019. However, you may suggest your non-listed company to join NSDL so that even those shares can be dematerialized and shareholders can benefit from the same.
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