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Dematerialisation of Shares is a process of transferring physical certificates into electronic certificates. The shareholder needs to have an account with a depository participant (DP). An investor has to surrender the certificates owned by him to the DP.
An intimation is sent to the National Securities Depository Limited (NSDL) for sending the securities to the issuer or R & T agent and request for dematerialisation.
The issuer or R & T agent registers NSDL as the holder of securities and the investor as a beneficial owner for communicating the confirmation of a request to NSDL. The NSDL credits the securities in the investor’s account held with the depository participant.
The process for getting the shares dematerialized is given in the following steps:
The articles should have a clause regarding authorization for the company for making dematerialized shares. The articles of the company need to be altered when it doesn’t have a specific clause.
The Board of directors should hold a board meeting for selecting and appointing the depository either NSDL or CDSL and the registrar for the issue of new shares or share transfer agent for the transfer of shares and authorizing person for signing the documents. A depository participant is a medium between an investor and a depository. The dematerialisation of shares procedure can be carried out with help of banks, and public financial institutions with the approval of the Reserve bank of India (RBI) and can be registered as DP after complying with the requirements provided by SEBI.
An application is a dematerialization request filed by the company to the registrar or share transfer agent in order to carry dematerialization with the certificates and other documents.
The form is verified with a number of certificates and a number of securities mentioned by the DP. An acknowledgment with signature and stamp is issued to an investor by the DP.
The scrutinizing of form for dematerialisation of shares is done by:
The request can be rejected in the following cases:
When the securities are aligned in systematic order, then the request is entered in the DP’s software by NSDL and a DRN is generated.
A person will verify the details for the DRN. The request is forwarded to the Depository module by DPM.
The DP enters the portion of the Demat Request Form for Dematerialisation of Shares.
The DP will dispatch the certificates with the request form with a cover letter to the issuer or R&T agent.
The issuer or R&T agent accepts the request for dematerialisation in the system
The DM authorizes the formation of credit balances in the investor’s account.
The DPM credits the account
The DP shall inform the investor about the changes in the demat account with acceptance of the request.
The request can be rejected by the issuer or R&T agent and an objection will be sent to the DP. The DP should remove the reasons for objection within 15 days of receiving the same.
The following steps are performed for filing a DRF:
The advantages of dematerialising are given in the following points:
The chances of damage or loss to the physical share certificate. With the help of dematerialisation, the shares are stored in a demat account.
The chances of fraud or duplication are high in the case of physical certificates. Through dematerialising the shares the chances of forgery are zero.
The transfer of shares from one person to another is quick and simple which is not possible with physical shares because it takes time for the transfer process.
The online demat account makes the transaction simple and convenient.
There are no stamp duties on the transfer of securities. The dematerialisation of shares charges is different from bank to bank. However, there are no charges levied by a depository on DP when a beneficial owner transfers securities to another branch of the same DP.
The bonus or split is credited into a demat account without any physical presence or physical certificates
Changes in address with DP where investors holding securities get registered with all the companies where there is a shareholding of investors.
Shares in the dematerialised form help in maintaining a record of a shareholder of companies transparently over beneficial ownership of companies.
In addition to registration or incorporation, a business may require other registrations depending on the business activity undertaken. Talk to an Advisor to find out registrations your business may require post registration.
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