The market regulator from 1 April 2019, shall allow transfer of shares only in demat format and so it has been asked from shareholders in possession of shares of listed securities to convert them into demat form. For this, guidelines prescribed by the Companies Act and SEBI need to be adhered to.
In the current regime, share transfer even if held in physical form as certificates can also be transferred from the seller of shares to the buyer.
Why the new rule?
The current ruling has been enforced to prevent fraud as with the physical shares there have been come to light incidences of unclaimed dividend on such shares as well as transfer of shares as physical certificates.
However, with the dematerialization of shares which is nothing but electronic keeping of shares, a bank account is linked to the demat account and any transaction with respect to the shares is directly or indirectly transferred to the attached or linked account.
Important point to note for shareholders who hold shares as physical certificate
It is worthwhile to note that shareholders who don't want to sell the held scrips of listed securities can do so. Nonetheless, if they wish to redeem their investments they can do so if the shares are held in dematerialized form. This is because now in order to sell shares they need to be maintained in dematerialized format only to realize the intrinsic or fair market value of the shares.