Physical Shares To Turn Illiquid After March 31: Here’s Rescue

After the extension in the previous deadline from December 5 to transfer physical shares, these listed firm shares unless dematerialized will be deemed illiquid. This implies that after the extended deadline of March 31, you will not be able to transfer or sell your held physical shares of listed companies.

SEBI’s latest notification for physical shares of listed companies

In a December 3 release, the SEBI said that it had "received representations from shareholders for extension of the date of compliance."

As per a ET Online store, of the 30 companies that constitute the benchmark index, there is no company in which shareholders possess all the shares in dematerialized form. And it is to be noted that it is primarily the senior citizens who are in hold of shares in physical forms. As on December 31, 2018, almost 4 percent of the total number of shares of the 30 Sensex companies were still held in physical form. That is 418 crore shares are still in non-demat form.

So, without much panic you can still consider getting your shares dematerialized. Below is given the process for the same:

How to convert to demat?

1.You need to first open the demat account and the shares are to be held in it similar to the ownership order i.e. in case of joint ownership order has to be maintained. Also note opening a demat account calls for completion of the KYC procedure in respect of all of the holders i.e. first and account holder.

For the KYC procedure, all of the details such as contact details, address, email, back account etc. has to be given.

2.Then you need to fill in the dematerialization request form or DRF in respect of the shares held in physical form along with all the requisite documents. In a usual case, for shares of different companies, different DRF form needs to be filled.

Notably there are still some company shares which have not joined a depository and hence these without a ISIN number cannot be dematerialized.

What will happen to these shares after March 31?

As per the SEBI ruling, these shares in physical form cannot be put for any kind of transaction i.e. either on stock exchanges or off-market mechanism between the buyers and sellers. However when it comes to transmission or transposition that would be possible, meaning in case of the death of the holder, the shares will be transferred to the new heir but the new holder will have to get the dematerialization done for further transaction in them.

Why so many listed company shares are available in physical forms?

It is because most of the shares were bought before the Depository Act was actually implemented and people then intended to hold the shares long term so they did not wish to spent extra on a demat account.

Also, there are some reasons such as these have been inherited from forefathers or so, also there are cases with joint ownership but neither of the holder survives or has any nomination specified, there also cases in which the investors of these physical shares have either change their names or moved abroad and have now become NRIs.

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