04 Dec 2018Posted By: Mudit Handa


Transfer of Physical Shares to be discontinued after December 5, 2018

The whole nation is heading towards a progressive era of digitalization. The economy in the present generation is witnessing tremendous advancement with the boom in e-commerce business and emphasis towards the digital transaction.

The government has also played its part by focussing on rapid and reliable digitalization of economy.

In a bid to ensure good governance, the Securities and Exchange Board of India (SEBI) had notified on June 8, 2018, that transfer of physical share would discontinue after 5th December 2018.

  • In other words, the dematerialization of shares would be mandatory for all listed companies with effect from 5th December 2018. The due date for dematerialization of shares is April 1, 2019.
  • The current ruling regarding dematerialization of shares has been promulgated after the recent amendment of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. With that, all the listed companies will be debarred from accepting the request for transfer of securities which are hitherto held in physical format from December 5, 2018.
  • All those shareholders who still wish to continue to hold the shares and other securities of listed companies in physical form even after December 5, will not be able to register their shares with company / its RTA (Registrar & Transfer Agent) for the purpose further share transfer.
  • Henceforth, all share transfers will be possible only upon conversion into demat form. However, the requests for transmission and transposition of shares will be accepted in physical form, by the listed companies or their RTAs.

Besides, shares of all unlisted companies or the new companies that have gone through company formation recently can also hold their shares in physical form.

 

#1. What did the SEBI notification mean?

The notification was about the new rule for Mandatory Dematerialization of physical shares. With effect from 5th December 2018, an investor will not be allowed to transfer shares in physical format. Hence, share transfer will be possible only after dematerialization of physical shares.

 

#2. When was the notification Demat of shares issued?

The notification regarding was dematerialization of shares was first issued by SEBI on June 8, 2018. The gazette notification regarding the same was issued by Ministry of Corporate Affairs (MCA)  on September 10, 2018.

Refer to the .

#3.  How much time does it take for Demat of shares?

Generally, it takes approximately 21 days for the process of Demat of shares, subject to complete documentation. However, this time limit may vary in case of certain kind of companies. One can easily check the status of Demat online.

 

#4.  What if the  demat  of physical shares is not done?

Well, in that case, it will not be possible to sell/transfer the shares after 5th December 2018. One will have to wait for the process of demat of shares sale/transfer is enabled.

 

#5. What can be done in the case of the shareholder?

In that case, the Transmission and Transposition of shares held in physical form will still be possible.

  • Transmission happens of shares is done upon the death of a shareholder.
  • Transposition means a change of the pattern of ownership. For instance, from combination A & B to B & A or from A, B & C to B, A & C can be done.

 

#6. Will transmission & transposition of shares be possible simultaneously?

Yes, the transmission and the transposition of shares is possible at the same time.

 

#7. What if the investor is holding non-listed shares in physical form?

Such Investors may continue holding non-listed shares in physical form. They can also sell/transfer the shares even after 4th December 2018. However, it is advised that non-listed companies also join NSDL so that their shares can also be dematerialized.

The shareholders of such companies will surely benefit from the same.

 

If you need any sort of guidance on the process of getting company formation or regarding the dematerialization of shares, feel free to contact our business advisor at 8881-069-069.

 

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