Step-by-Step Procedure For Dematerialisation of Shares with the help of RTA

TOPICS :   Business
Bhaskar Goyal
Bhaskar Goyal
Aug 12 , 2019 22 min read 159 Views Likes 0 Comments
Step-by-Step Procedure For Dematerialisation of Shares with the help of RTA

Being a shareholder, it is vital that you have are aware of how to manage all your physical share certificates and how to dematerialize them to manage them easily.

Dematerialization of shares refers to the process of converting physical share certificates into the electronic or dematerialized form in order to manage them properly. Dematerialization process can also be compared to the transfer of your money into the bank account so that you can maintain proper records of all your financial transactions.

Similarly, in case of the dematerialization of shares, the physical share certificates of shareholders are replaced with the electronic book entries where the purchase of shares is denoted as the credit entries whereas debit entries denote the selling of shares.

The shares or debt investment made by investors can be held in electronic or dematerialized form with the help of a Demat Account managed by a Depository. Depositories, for holding dematerialized shares of investor takes help of depository participants (DP) and registrar and share transfer agents like SAG RTA Registrar and Share Transfer Agent, CAMS, etc. SAG RTA under its sphere of RTA services provides dematerialization facility via NSDL and CDSL depository in India.

The depository is an entity that manages all the investor securities in the electronic form at the request of investors. The two depositories in India are National Securities Depository Limited (NSDL) and Central Depository Services Ltd (CDSL).

Depositories also take the assistance of depository participants (DPs) that operate as s intermediary between the issuer company and the actual DP. DPs assist investors in purchasing company shares by providing an interface between the depository and investor. It also helps investors manage their demat accounts properly.

A registrar and share transfer agent, in this process, helps depository participants (DPs) in security (e.g. bonds, shares, debentures, etc.) dematerialization process.

Similarly, the companies looking to dematerialize their shares are also required to take help of registrar and share transfer agents, e.g., SAG RTA to complete their process. SAG RTA Registrar & Transfer Agent Services also include the share dematerialization facility for companies and shareholders.

Share Dematerialization Process of Companies

  • For any particular company to become a share issuer or offer Demat facility to its shareholders, it first needs to make an amendment ib its ‘Articles of Association.’

  • A special resolution needs to be passed by the company owners in the general meeting. Passing to this resolution enable the company to issues shares to investors in the dematerialized or electronic form,

  • In the case of Indian private companies looking to apply for dematerialization of the shares must register will both the Central depositories, i.e., the National Securities Depository Limited (NSDL) and Central Securities Depository Limited (CDSL). The private companies should also fulfill all the preset criteria of both these depositories to get registered.

  • If all Depository terms and conditions are met, the applicant company gets and International Securities Identification Number (ISIN) for each of its shares.

  • “ISIN” is a unique identification 12 digit alphanumeric number that is generally liked to all kind of securities, i.e., security, shares, Debentures, Bonds, etc. and is offered by the depository to companies going through dematerialization process.

  • Demat connectivity from depositories like NSDL or CDSL and a registrar and share transfer agent is necessary for companies looking to transfer their dematerialized shares into demat account of shareholders. To achieve demat connectivity, a tripartite agreement between the company, the depositories and the transfer agent is generally required.

  • A Registrar and Share Transfer Agent like SAG RTA serves as the company/issuer agent in this process. It facilities interaction between depository participants & investors, and provide services like dematerialization, initial public offers, rematerialization, and corporate Actions.

  • There are some procedures that should be followed by any Company who wishes to get its physical shares Dematerialized. These guidelines are devised by two national depositories like NSDL and CDSL in India for companies.

How to Get Dematerialized Company Shares into Demat Account?

  • The registered shareholder of the company first needs to open a Demat account with a depository participant (DP) and obtain an account number.

  • The registered shareowner then needs to fill a Demat Request Form (DRF) and submit the same alongside all the physical share certificates for dematerialization to the depository participants.

  • For each ISIN, a separate DRF should be used by registered owners. If the Beneficiary Owner (BO) has both free and lock-in shares against the same ISIN, then separate Demat request must be raised against both free shares and lock-in shares.

  • Depository participant (DP) would later verify the accuracy of DRF filled by the registered shareowner.

  • Demat request on the CDSL or NSDL system would be raised by DP and will also intimate share issuing company and the Registrar and Transfer Agent about the same.

  • The genuineness of the deposited share certificates to the DP will be verified by Issuer/ Registrar and Transfer Agent (RTA) and would also confirm the request.

  • Once the Dematerialization Request (DR) is raised successfully, DPv would destroy the submitted physical share certificates and generate a Demat Request Number (DRN). Through electronic communication, this DR would be sent to the depository, whereas DRF and the Share certificate will be sent to the issuer company/ R&T Agent.

  • After receiving the confirmation, the depository is supposed to credit an equivalent number of securities in the demat account of the Beneficiary owner (BO) which is maintained with CDSL or NSDL.

  • Once the depository receives the request, it will electronically transfer the equivalent number of securities to the registered shareholder's demat account that is maintained with NSDL and CDSL.

Role of Registrar and Share Transfer Agent during the transfer of Dematerialized Shares

Registrar & Share Transfer Agent play a very important role in completing the transfer of dematerialized shares as they are the ones which confirm with the concerned company before making any approval to investor request for share transfer.

Registrar and Transfer Agent, e.g., SAG RTA, CAMS, and Karvy also handle the documentation duties during the dematerialization process for the convenience of investors/shareholders and mutual fund houses. All the background documentation work is actively done by R & T Agent to support the fund houses.

Shareholders looking to transfer their dematerialized company shares must have a Demat account with the Depository Participant (DP) and surrender all its physical share certificates to it.

Delivery Instruction Slip (DIS) is required by a particular shareholder to transfer his shares into the Demat account of another shareholder. Delivery Instruction Slip (DIS) works as an investor checkbook; hence should be handled with care.

Shareholders trading on traditional stock exchanges should inform their DP and R & T Agent to transfer/receive shares from his/her Demat account to their respective broker’s pool account.

For making an off-market transaction, i.e., transfer of shares to any other buyer’s account, the shareowner should instruct the DP to make this transaction pass on successfully and can help of Registrar and Transfer Agent for the same.

Any other security (e.g., bonds, debentures, etc.) can be transferred to other buyers account through the same aforementioned procedure by a particular shareholder by instructing the concerned DP for the same. In DIS, Demat account number should be mentioned carefully

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