From 2019 onwards, Sebi mandated that investors who want to transfer shares held in physical form after 1 April, then those shares are to be first dematerialised even as the investor can continue to hold the shares in physical form even from 1 April. To sell and transfer, you will have to convert it into Demat form. In the case of transmission or transposition of securities, physical shares are valid.


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Also, note that you can only convert shares that are active and trading on the exchange into Demat form. Demat or dematerialized shares are the paper form of securities. Dematerialisation is a process through which physical securities such as share certificates and other documents are converted into electronic format and held in a Demat account. Keep in mind that physical shares of companies which are not active and not trading can’t be converted to Demat form. The process of converting physical shares to Demat is simple for which you have to first open a Demat account. It is just like opening a bank account.

How to convert to Demat?
The first step towards converting the shares into Demat is to open a Demat account. The Demat account will have to be opened in the names of all the holders of the shares in case of shares which are held jointly and the order of holding (first and second) in the Demat account will have to be the same as that of the shares.

In order to open a Demat account, the investor has to fulfill all the KYC verification procedures including contact details, address, email, bank account for electronic transfer of dividends, and such details. The second step is to complete the Dematerialisation Request Form (DRF) for the physical shares, along with all the required documents. Normally, separate Demat forms need to be filled in for shares of different companies.

How to open a Demat account?
Demat accounts can be opened with any depository participant (DP) in India. A DP is basically a financial services firm that ties up with a depository and becomes a participant. Once the shares are dematerialised with a particular DP, it is held in the Demat account of the client and allotted unique Client IDs.

Ideally, the securities in the Demat account are held by the depository participant (DP) with any one of two depositories in India. There are two types of Depositories - National Securities Depository Ltd (NSDL) and the Central Depository Services India Ltd (CDSL). The Depository where your shares will be held in Demat form will depend on which one your financial services firm has tied up with. The address of your Demat account therefore would include the client ID and the DP-ID after that.

Some of the DPs operating in India include Stock Holding Corporation of India Ltd, HDFC Bank, ICICI Bank, etc.

How to surrender the share certificates?

Once the Demat account is opened with a DP, you need to surrender the physical certificates to the DP along with a Dematerialisation request form (DRF). You should use separate DRFs for securities of different companies.

At the time of submission of the certificates, you need to deface them by writing “SURRENDERED FOR DEMATERIALISATION” on the certificates. The input such as the number of certificates, securities, type, and so on will be verified by the DP.

Once you have surrendered the share certificates you will get an acknowledgment slip after which you have to wait for credit of shares to your demat account. Once the share certificates are accepted, your units will get reflected in your Demat account.

Remember that the DP may not accept your request for dematerialisation in certain cases for instance if the share certificates are mutilated, and the information is not easily readable. Also if you use a single DRF to dematerialise securities of more than one company.