Mandatory norms for shareholders holding shares in physical form (2024)

A rise in inflation makes it necessary to make an impactable investment decision. Being an investor, it is no secret that dealing in shares can be a valuable part of an investment journey. Holding shares in companies can maximise your income, build your savings and protect your money from inflation.

Dealing in the Indian financial market requires the shares to be dematerialised. However, there are some shareholders holding shares in physical format; as on December 31, 2018, almost 4 per cent of the total number of shares of the top companies were still held in physical form. That is 4180 million shares still in Non-Demat form. Last year, a total of 4230 million shares, nearly worth 4 trillion, were held in physical form among the top companies. There wasn’t a single company in the benchmark index where all shares were dematerialised.

Physical Share certificates have no value after April 1, 2023. They yield zero value and zero return unless converted into a Demat of shares (Dematerialised) form. You can’t encash your paper share certificates.

Therefore, to realise the worth of your investments, the first and immediate step you need to take is to do your KYC. KYC is critical to converting physical shares into a Demat of shares format. If you do not do this on priority, your investment will get frozen, compounding the problem further. SEBI has said that if any of the documents mentioned below are not made available on or before April 1, 2023, they will be frozen by RTA. SEBI has made KYC essential for all investors in its circular dated November 3 2021.

SEBI issued a circular on November 3 2021, in which common and simplified norms have been laid down concerning furnishing PAN, KYC details, and Nomination. Later on, on December 24 2021, issued an additional circular with clarification w.r.t to the previous circular. This circular made it mandatory for the shareholder holding share in physical form to furnish details to the RTA (Registrar and Transfer Agent) of the Company, i.e. Link-Intime India Private Limited (Link-Intime).

Why is it important to convert shares in dematerialised form?

The government has introduced the dematerialisation of shares for the ease of investors. There are numerous cons involved in holding shares in physical form. One has to safely keep the share certificates in custody and ensure they will not be lost. Another major drawback is that the share certificate and transfer form must be set to the company’s register to get a new certificate printed with their name after purchasing it from the broker.

On the other hand, there are countless benefits of shares in dematerialised form. The electronic transaction can be carried out easily through a Demat account. It allows you to have a nominee, also. The Demat account also provides benefits similar to a bank account, for instance, drawing cheques transferring funds etc.

It is requested that the shareholders and their family members make the required compliances if they are holding shares in the physical form. Please convert it into dematerialised format before April 1, 2023, in regards of this, the SEBI has laid down a vital circular that shareholders who are holding shares in physical form are required to complete their KYC and submit the necessary documents before April 1 2023. Otherwise, shares in physical form without the KYC are likely to be frozen. Aapki amanat – aap tak.

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