Dematerialization Process – Special Situations

by Shiv Kukreja on July 12, 2012

in Investments

This post is written by Shiv Kukreja

“Converting my physical share certificates and mutual fund investments into a dematerialised form has been a huge pain”. This is the experience which many of my clients have shared with me. The reasons are many – lack of knowledge with the clients about how, where and whom to approach, complicated procedures to do it, very little knowledge with the people who work for broking companies or DPs and most importantly very little interest shown by the sales-driven broking industry. We are giving it a shot to simplify the process a bit for you.

How to dematerialise your physical asset holdings

Dematerialisation is the process by which physical certificates of one’s financial investments like shares or mutual funds can be converted into an electronic form. An investor, who wants to get the securities dematerialised, needs to have a demat account with any of the depository participant (DP) like HDFC Securities, ICICI Securities, India Infoline etc.

The investor needs to surrender the certificate(s) to the DP along with the duly filled Dematerialisation Request Form (DRF), who then sends the securities to the concerned Registrar & Transfer (R&T) agent. To avoid any misuse of the share certificates, the investor must ensure that they are defaced by marking “Surrendered for Dematerialisation” on the face of the certificates. After receiving the certificates, R&T agent registers either NSDL or CDSL as the holder and the  client as the beneficial owner of these securities, if the certificates are found to be in order.

On receiving intimation from the R&T agent, NSDL or CDSL credit the securities in the depository account of the client with the DP and inform the client accordingly. It should not take more than 30 days from the date of submission of a demat request to get the holdings dematerialised.

Dematerialisation request is subject to a DP scrutiny and can be rejected in case:

* A single DRF is used to dematerialise securities of more than one company.
* A single DRF is used to dematerialise securities having different ISINs of the same company.
* If the material information on the security certificates is not readable.
* Part of the certificates pertaining to a DRF are either “locked-in” or “partly paid-up”.

Here are some of the common situations I’ve seen over the years.

Transfer cum Demat Form – Transfer of physical securities certificate from one name to another requires the investor to forward the certificate along with the duly stamped and executed “Transfer Deed” and “Transfer cum Dematerialisation” form. While sending the certificates for transfer, the investor must ensure that the transfer duty has been paid, the stamps are cancelled and the transfer deed is complete in all respects like the transferor’s signature, broker’s stamp, SEBI registration/code no., full address of the transferee, everything is there.

Death of a joint holder – Transmission cum Demat Form – In the event of death of a joint holder(s), the other joint holder(s) can get the name of the deceased joint holder(s) deleted from the physical certificate and simultaneously get the securities dematerialised by using the “Transmission cum Demat” form.

Death of a single holder/investor – Transmission in case of nomination – In the event of death of a single beneficial owner (or investor/client), the nominee(s) can get the securities dematerialised by using the “Transmission cum Demat” form along with a notarised copy of the death certificate. These securities will then automatically be transferred in the name(s) of the nominee(s).

Death of a single holder/investor – Transmission in case there is no nomination – In the event of death of a single beneficial owner without a nomination, the legal heir(s) or legal representative(s) can get the securities dematerialised by using the “Transmission cum Demat” form, a notarised copy of the death certificate and any of the following notarised documents – succession certificate or copy of probated will or letter of administration.

Difference in the sequence of holding – Transposition cum Demat Form – The names of the holders on a certificate should exactly match with the names in the demat account and in the same sequence. If the sequence of names on a certificate is different than the sequence in the demat account, then the securities can be dematerialised by using “Transposition cum Dematerialisation” form. e.g., If A and B have a joint demat account in the same sequence and some share certificates are held in the sequence of B and A, then the shares can be dematerialised in the same demat account using the “Transposition cum Demat” form.

Theft/Loss of a certificate – A complaint needs to be lodged with the local police station and a copy of the FIR should be obtained and the event should immediately be reported to the R&T agent along with the certificate no./folio no./distinctive nos. to “Stop Transfer” of such certificate(s). The client should then request for a fresh issue of duplicate certificate by sending both these documents physically to the R&T agent.

Change in the name consequent upon marriage/divorce – The securities certificate along with a copy of marriage certificate/decree of divorce and fresh specimen signature, duly attested by the competent authorities should be forwarded to the R&T agent. The client is also required to open a new demat account with the changed name and then send the new certificate for dematerialisation.

These are some of the most common situations that the clients face. If you’ve any personal special situation/experience regarding dematerialisation of your physical holdings, then please do share with us.

{ 13 comments… read them below or add one }

Ashok July 12, 2012 at 8:46 am

Hello,

Has anyone dematerialised their Mutual Fund holdings? What advantages do you see in it (considering that anyway we do not have “physical” holding of mutual funds; All we have is a unit statement) ?

If I dematerialize my MF holdings can I continue with the currently running SIPs? Or do I have to start all over again? Any experiences?

Reply

Shiv Kukreja July 14, 2012 at 1:41 am

Hello Mr. Ashok

Though holding your mutual fund units in a statement form is considered as holding them in a “physical” form, you are somewhat right that you are at no risk if the statement gets lost or stolen, unlike your share certificates.

Also, you can get your existing MF holdings dematerialised whether they were bought either with lump sum investments or through SIPs but you cannot get fresh units transferred into your demat account with your already running SIPs because these were offline SIP requests made directly to the AMCs earlier.

I’m writing another article on the process of dematerialisation of mutual fund units. I hope you’ll soon have it here.

Reply

Umesh July 13, 2012 at 6:19 pm

Hi Shiv

You have written a very good article on the subject. You said
“Transfer cum Demat Form – Transfer of physical securities certificate [……….] full address of the transferee, everything is there.

I have some queries
1. From where to get transfer deed.
2. From where to get transfer fee stamps to pay transfer duty.
3. How to calculate transfer duty.
4. The process of transfer has to be routed through a broker or one can send share certificates along with transfer deed duly completed and stamps fixed to the R&T agent.
5. If one can send himself then broker stamp is necessary as mentioned in the paragraph or the broker stamp is required in “Transfer cum Dematerialisation” and not in “transfer deed”
6. What to do if one knows that there is a chance of difference in signature, so that one can submit requisite documents along with transfer deed.
7. What to do when shares are in the name of abcd mnop wxyz (3 words) like Amit Kumar Sharma but the PAN card and trading and demat accounts are in the name of abcd mnop or abcd wxyz ( 2 words) as Amit Kumar or Amit Sharma or the vice versa. Will there be any problem in dematerialisation of shares in such cases.

I hope that you will be kind enough to reply above points. I live in Delhi NCR and so please answer accordingly.

Reply

Shiv Kukreja July 14, 2012 at 1:53 am

Thanks Umesh!

I’ll definitely try to answer most of your queries to the best possible accuracy.

* In Delhi, “Transfer Deeds” are available near Delhi Stock Exchange building at Asaf Ali Road. I get them from there only and have no clue of any other place.

* Share transfer stamps can be obtained from authorised stamp vendors or from your broker.

* The stamp duty applicable on share transfer is 0.25% of the market value of the shares on the date of execution of the transfer deed.

* It has to be routed through your DP because it is the responsibility of your DP to scrutinise these documents before sending it to the R&T agent of the company.

* Get the signature attested by your bank manager, if you have a slightest of doubt.

* Get an affidavit made, duly notarised, stating the names belong to the same person. I get them made from Nehru Place.

I hope it answers your queries. Please don’t mind if you find any major discrepancy here.

Reply

Umesh July 15, 2012 at 12:32 pm

Many thanks to you Shiv. You are really very helpful.
Your answers will help me and many other readers of OneMint.
Thanks once again.

Reply

Shiv Kukreja July 15, 2012 at 3:29 pm

Thanks Umesh, you are most welcome! 🙂

Reply

Manshu July 17, 2012 at 5:10 am

Good question, and superb answers! Thanks a lot Shiv!

Reply

Shiv Kukreja July 17, 2012 at 9:37 am

Thanks Manshu! 🙂

Reply

Karthik Reddy Chintaparthi July 20, 2012 at 9:37 am

I bought few Infrastructure bonds last two years in physical format. Can I dematerialize them too ? If yes, can I request the issuer to do so ?

Reply

Shiv Kukreja July 20, 2012 at 10:08 am

Hi Karthik… yes, Infra Bonds can be dematerialised. You need to approach your DP for the same, duly fill the “Dematerialisation Request Form” (DRF) and attach the certificate along. Your DP will first ensure that everything is in order and then send it to the R&T agent of the issuer to get it dematerialised.

Reply

manu July 23, 2012 at 11:17 pm

Hi Manshu, This is some sort of personal advise I am with the company where I am selling the product of my choice but cannot give variety to investor at the same moment I can join the bank where I do have the variety of finacial products but I had to sell insurance which you know how is bieng sold in the banks.

Kindly advise

Reply

Manshu July 29, 2012 at 2:03 am

I really don’t know what to say Manu, I think this is the kind of advice your mentor or someone who knows you very well, is wise, and has your best interest in mind should be giving you. I’m not that person.

Reply

Yash Pal September 30, 2012 at 4:13 pm

A good article. Everybody deals with the run of the mill situation, it is only when people get into a special or out of the ordinary situation that they are confused which is confounded by:
‘lack of knowledge with the clients about how, where and whom to approach, complicated procedures to do it, very little knowledge with the people who work for broking companies or DPs and most importantly very little interest shown by the sales-driven broking industry’, as you very rightly put i t.

I do hope that you will continue with the good work and deal with certain other situations also so that clients are educated properly and can deal with the situation on their own.

Reply

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