Dematerialization is a method of transforming physical securities such as share certificates and other documents into electronic format and keeping them in a Demat account. An investor who wants to dematerialize their securities must open a Demat Account with a Depository Participant (DP). A depository is responsible for storing a shareholder's securities in electronic form, these securities may be held by a registered Depositary Participant (DP) in the form of Share Certificates, bonds, government securities, and mutual fund units.
There are currently two depositories registered with SEBI and authorized to operate in India:
➲ Easy and convenient in holding securities
➲ Dematerialization reduces paperwork
➲ Dematerialization remove threat of loss, damage, and tampering of securities
➲ Trading can be done easily from anywhere
➲ The dematerialization starts with an opening of the Demat account. The investor needs to shortlist a Depository Participant (DP) who provides Demat services for the opening of Demat account.
➲ If the Demat account has been opened, the investor (registered owner) is expected to send an application for dematerialization to the DP in the Dematerialization Request Form (DRF) along with the securities certificates (Share Certificates) to be dematerialized. "Surrendered for Dematerialisation" has to be listed on every share certificate.
➲ The DP verifies data, including the certificates, filled out in the DRF. The inspection involves checking the signature of the company on the request for dematerialization with the signature of the specimen, contrast of the names on DRF and the customer account certificates, paid-up status, distinctive numbers, etc. If the type and security count are right, the DP will issue a duly signed and stamped acknowledgment slip.
➲ In the event, the securities are not in order to return them to the client.
➲ The DP processes the request through the depository along with the company's share certificates and simultaneously with the Registrars and Transfer Agents.
➲ If the shares are in order, the physical form of the share certificates will be destroyed and the dematerialization notice submitted to the depository.
➲ When the request has been accepted, the actual share certificates are destroyed and the dematerialization document sent to the depository.
➲ The depository then ensures that the DP's shares are dematerialized. When that is done, the investor's account will electronically represent a credit in the holding of shares.
After the date submission of the dematerialization of shares, it will take 15-30 days to complete the cycle.
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