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What is meant by dematerialization & how physical shares can be dematerialized ?

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The process of converting holdings of physical shares, mutual funds or any other security in to electronic form is know as dematerialization. In order to convert stocks in electronic form traders and investors needs to have demataccount which they can open with any depository participant who is registered with NSDL and CDSL. When an investor buys shares then they are stored in electronic form in their demat account and will be removed from it when they sell it.

In following manner process of dematerialization is carried out:

1) When an investor is willing to covert its physical shares in electronic form then they submit a request to their DP using DRF form along with required documents like certificates of securities.

2) On receiving this request DP forward DRF form and certificates to the company’s registrars.

3) A confirmation of dematerialization is sent to NSDL/CDSL after the request gets approved.

4) Post the entire process investors can see their holdings in electronic form in their demat account.


How to dematerialize shares of companies which are merged, suspended or De-listed is discussed below :

1) De-listed shares

There is a possibility that you are having some stocks in your portfolio which are now being De-listed from the exchange.It has been made mandatory by exchange for such companies to accept all buy back requests at least till one year after De-listing of shares. After one year investors can not convert such shares in electronic form however they are liable to receive dividend for their holdings.

2) If company is suspended

Suspended shares can be easily converted in to electronic form by following the above mentioned dematerialzation process.

3) If company gets merges or split

In such cases old physicals copies are of no use and are canceled.Companies issues new certificates to all its shareholders and mention them in their records. These new copies can be presented to carry out the process of dematerialization. You may contact company if in case they have not issued you these new copies of certificates.

4) If name of a company gets changed

Because of several reasons sometimes a company changes its name.If name of company has been changed then you need to have a new copy of certificates with its updated name as certificates with old name can be used for dematerialization. Always check for company names before you send request of converting your shares.

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