DEMATERIALISATION & DEMUTUALISATION-

Dematerialisation is the process by which a client can get physical certificates converted into
electronic balances.
An investor intending to dematerialise its securities needs to have an account with a DP. The
client has to deface and surrender the certificates registered in its name to the DP. After
intimating NSDL electronically, the DP sends the securities to the concerned Issuer/ R&T
agent. NSDL in turn informs the Issuer/ R&T agent electronically, using NSDL Depository
system, about the request for dematerialisation. If the Issuer/ R&T agent finds the certificates
in order, it registers NSDL as the holder of the securities (the investor will be the beneficial
owner) and communicates to NSDL the confirmation of request electronically. On receiving
such confirmation, NSDL credits the securities in the depository account of the Investor with
the DP.

How do shares gets converted into electronic mode?

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 1. Dematerialization starts with opening a Demat account.
2. To convert the physical shares into electronic/demat form, A Dematerialization
Request Form (DRF), which is available with the Depository Participant (DP), has to be
filled in and deposited along with share certificates. On each share certificate,
'Surrendered for Dematerialization' needs to be mentioned.
3. The DP needs to process this request along with the share certificates to the company
and simultaneously to registrars and transfer agents through the depository
4. Once the request is approved, the share certificates in the physical form will be
destroyed and a confirmation of dematerialization will be sent to the depository
5. The depository will then confirm the dematerialization of shares to the DP. Once this
is done, a credit in the holding of shares will reflect in the investor's account
electronically.
6. This cycle takes about 15 to 30 days after the submission of dematerialization request
7. Dematerialization is possible only with a Demat account.

NOTE- Demat requests received from client (registered owner) with name not matching
exactly with the name appearing on the certificates merely on account of initials not being
spelt out fully or put after or prior to the surname, can be processed, provided the signature
of the client on the Dematerialisation Request Form (DRF) tallies with the specimen signature
available with the Issuers or its R & T agent.

CORPORATISATION & DEMUTUALISATION:

The Central Government has announced its proposal to corporatise the stock exchanges by
which ownership, management and trading rights would be segregated from each other.
Accordingly SEBI constituted a group headed by Justice M.H. Kania, former Chief Justice of
India on Corporatisation & Demutualisation of Stock Exchanges in India. The Group has
recommended corporatisation and demutualisation of the stock exchanges and the
modalities thereof.

While the existing members will be entitled to shares in the corporatised / demutualised stock
exchanges in lieu of the existing rights, the voting rights of the shares held by the broker
shareholder would be determined by SEBI in consultation with the Government of India

The Board of the demutualised stock exchange will have equal representation of brokers,
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shareholders and investing public, except in the case of NSE where the present structure of
the Board would be maintained. Thus, the broker shareholder of the demutualised exchange
can have up to one-third representation on the Board of the stock exchange.

The names of all the directors including the broker directors to be appointed on the board of
the demutualised exchanges will require the prior approval of SEBI.

All directors including broker directors will be on the Board of demutualised stock exchanges
for a tenure to be determined by SEBI.

Why demutualise?

The arguments in favour of demutualisation could be summarised as follows:

• Conflict of interest
• Greater management accountability
• Interest of other players

• To cope with competition, stock exchanges require funds. While member-owned

stock exchanges have limitations in raising funds, publicly owned stock exchanges
can tap capital markets.
• Publicly owned stock exchanges can be more professional when compared to
member-owned organisations. Further, as a result of the role played by
shareholders, strengthening of the management and the organization, there is
greater transparency in dealings, accountability and market discipline.
• This would enhance management flexibility. A publicly held company is better
equipped to respond to changes when compared to a closely held mutually owned
organisation. Further, a company can spin-off its subsidiaries, get into mergers and
acquisitions, raise funds, etc.

DIFFERENCE BETWEEN INTERNATIONAL STOCK EXCHANGES AND NSE:

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 • Presently, three stock exchanges namely, BSE, Ahmedabad Stock Exchange (ASE) and
Madhya Pradesh Stock Exchange (MPSE) have been set up as voluntary non-profit
making association of persons;

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