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Procedure for dematerialization of shares

Postedby:AmartyaBag inAll,General

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November18,2014

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ABOUT THE AUTHOR

AmartyaBagworksasaresearcherand
contentdeveloperforiPleadersandgoesby
thedesignationof"ContentScientist".He
hasspecialinterestsinintellectualproperty
andinformationtechnologylaws.He
frequentlycontributestoWikipediaonawide
rangeoftopics.

BY AMARTYA BAG
ThisarticleiswrittenbyYashBagra.

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Dematerializationisaprocessofgettingyoursharephysicalcertificateintoelectronic

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format which is maintained in an account, known as the demat account with the
depository participant (DP), who is basically an agent between the company and the
depository.
AcompanyshouldamenditsArticlesofAssociationbypassingaspecialresolution
inthegeneralmeetingofthecompany,therebyallowingthecompanytoissueshares
indematerialisedform.
Private companies should register with both the central depositories i.e., National
Securities Depository Limited (NSDL) and Central Securities Depository Limited

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(CDSL).Thesedepositorieshavetheirowntermsofregistration,soitisnecessaryfor
a company to meet those criteria. If registration is successful depositories will be
providing companies with an International Securities Identification Number (ISIN)
for each of the shares. ISIN is a unique 12 digit alphanumeric code given to a
security, shares, Debentures, Bonds etc. when the security is admitted in the
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ProcedurefordematerializationofsharesiPleaders

depository system. First two

Diploma in Entrepreneurship

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digits of the ISIN code indicate

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country of registration for the

security.

For

all

securities

registered on depository in

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India,firsttwodigitsoftheISIN
codeareIN.

1friendlikesthis

If the private company wants

to transfer its dematerialized

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shares it may arrange demat
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connectivity
from depositories
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likeNSDLorCDSLalongwitha

Enter(RTA)
your email
address here...
Registrar and Transfer Agent
by entering
into a tripartite agreement between

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the company, the depositories and the transfer agent. An RTA i.e. Registrar and
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agreementsandhowtonegotiatethem
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Transfer Agent is an agent of the issuer. RTA act as an intermediary between the
issuer and depository for providing services such as Dematerialization,
Rematerialisation,InitialPublicOffersandCorporateactions.

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Now,ifthecompanywantstodematerializeitsphysicalsharesithastofollowcertain
procedureslaiddownbydepositorieslikeNSDLandCDSL.Thegeneralstepsinvolved
intheprocessareasfollows:

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Partnerships&PrivateLimitedCompany
August12,2011

Step1: Beneficiary Owner (BO) has to open a demat account with a Depository
participant(DP)andobtainanaccountnumber.

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Act,1953
April6,2012

Step2:BOneedtofillinaDematRequestForm(DRF)andsubmitthesamewith
thephysicalcertificate/stothedepositoryparticipantsfordematerialization.Foreach
ISIN,aseparateDRFhastobeused.IftheBOhasfreeaswellaslockinsharesofthe

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January29,2015

sameISIN,separatedematrequesthastobesetupforfreesharesandlockinshares.
Step3:DPwouldverifythattheDRFhasbeenfilledcorrectly.

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Step4:DPwouldsetupadematrequestontheCDSLorNSDLsystemandsendthe
sametotheCompanyandtheRegistrarandTransferAgent.
Step5:Issuer/RegistrarandTransferAgent(RTA)wouldverifiesthegenuineness
ofthecertificatesandconfirmstherequest.

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Step 6: Once the request has been successfully made, DP would deface and
mutilatethephysicalcertificates,generateaDematRequestNumber(DRN)andsend
an electronic communication to the depository and courier the DRF and the share

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PunjabLabourWelfareFundAct,1965
August11,2015

certificatetothecompanybycourier.
Step7:Onreceivingconfirmation,depositorywillcreditanequivalentnumberof
securitiesinthedemataccountoftheBOmaintainedwithCDSLorNSDL.

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Step8:Thedepositorywillelectronicallydownloadthedetailsofthedematrequest
and communicate the same to the electronic registry maintained by the Registrar of
Companies.

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August9,2015

Transfer of shares by an individual in dematerialized

form

SameerParekh:Vrinda,needtogetin
touchwithyouregardingsetupofam...

Ashareholderwhowantstodematerialisehissharesneedstoopenademataccount
dr.g.balakrishnanphdML,advocate:it
shouldbeclearthateverypublicactivity
isgovernedby...

withDepositoryParticipant(DP),andsurrenderhisphysicalshares.
Ifashareholderwhowantstotransfersharestothedemataccountofanothercan
transfer by issuing appropriate instructions to the concerned depository participant

dr.g.balakrishnanphdML,advocate:
oneshdnote,whenyouliveinajoint
familyoraloneasa...

throughDeliveryInstructionSlip(DIS)whichwillbeissuedbytheDP.Thedelivery
instruction slip is a book similar to a cheque book and an investor is supposed to
handleitwiththesamecareasachequebook.

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it...

Ifaninvestorwantstotransfersecuritiesthroughthestockexchange,he/shehasto
instructtheDPtotransfersharesfromhisdemataccounttothebrokerspoolaccount.
Incasehewantstotransfersharestoanyotherbuyer`sdemataccount,i.e.,anoff
markettransaction,hewillhavetoinstructhisDPtotransfertotheconcernedbuyers
http://blog.ipleaders.in/procedurefordematerializationofshares/

SameerParekh:Vrinda,Needyourhelp
withthesetupofamicrobreweryin
m...

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8/19/2015

ProcedurefordematerializationofsharesiPleaders

demataccount.Similarly,securitiescanbetransferredtothebuyersdemataccountby
the instruction of the seller (transferor) to his concerned DP. The seller is supposed
mentioninvestor`sdemataccountnumberintheDIS.
ItisimportanttonotethatRTAhastoconfirmfromthecompanybeforeapproving
the transfer. Company approval is necessary and then only RTA shall register a

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ABOUT AMARTYA BAG

Amartya Bag works as a researcher and content developer for iPleaders and
goes by the designation of "Content Scientist". He has special interests in
intellectualpropertyandinformationtechnologylaws.Hefrequentlycontributes
toWikipediaonawiderangeoftopics.

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