Understanding Demat of Shares under the Companies Act 2013

Priya Garg | Last updated: 04 September 2024

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Quick Summary

The Companies Act 2013 has modernised shareholding by introducing provisions for the dematerialisation of shares, commonly known as demat. This process converts physical share certificates into electronic records, held in a Demat Account, offering greater transparency and efficiency. Key provisions include mandatory dematerialisation for certain securities and regulation of depositories, streamlining share transfers and reducing risks associated with physical certificates.

In today's digital age, the process of dematerialization of shares has become a common practice among investors. With the advancement of technology, the Companies Act 2013 has introduced various provisions regarding the demat of shares to ensure transparency and efficiency in the capital market. In

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FAQ :

Dematerialisation, or demat, is the process of converting physical share certificates into an electronic format. This allows investors to hold and trade securities electronically through a Demat Account, eliminating the need for physical certificates.

The Companies Act 2013 mandates dematerialisation for certain securities, regulates the functioning of depositories that hold electronic securities, and outlines the procedure for transferring shares held in dematerialised form.

Benefits include reduced risk of loss or theft of physical certificates, increased convenience for buying, selling, and transferring securities online, cost savings on stamp duty and paperwork, and faster settlement of transactions.

Depositories are regulated by the Act and act as intermediaries between investors and companies, maintaining investors' securities in electronic form and ensuring smooth transfer and settlement of these securities.