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Physical shares to demat — the hurdles

Physical shares to demat — the hurdles
Signature mismatch to death of the owner are some of the problems. Here are ways to deal with them

Did you find a bunch of yellow certificates while cleaning your parent’s or grandparent’s cupboard? It’s quite possible that those are share certificates, still in the physical form, purchased way back in the seventies or eighties. You need to brace yourself for problems while trying to convert these physical shares into electronic (demat) form.

To start with, the beneficiary (owner of the physical share certificate) should have an active account with a depository institution. Otherwise, he has to open a new account in the name of the beneficiary. This can be done through banks or stock brokerages. Depository participants (DP) from banks and stock brokerages form the interface between beneficiary and depository institutions (National Securities Depository Limited (NSDL) and Central Depository Services India Limited (CDSL)), hand-holding the beneficiary for various services.

After filling the demat request form (DRF), the beneficiary should submit the physical share certificates to the DP. After defacing the certificate, the DP will send the share certificates to the Registrar and Transfer Agent (RTA). At this stage, the certificates are scrutinised for basic signature and mismatches and joint account ownerships.

Besides this, the certificates are also verified — whether they are currently pledged anywhere, any pending court cases on the shares and other forms of possible forging. Also, in case you still retain the physical shares of a company that has been merged with/acquired by another company, you need to send the details to the surviving entity’s RTA.


The problem of signature mismatch for the beneficiary between the company’s ledger during purchase of the physical share and the current signature in the demat request form is highly likely, especially if the physical certificates are few decades old. To even out these differences, after validating the physical shares, the company’s RTA sends an affidavit to be filled by the beneficiary.

On receiving it, the beneficiary should fill in the details and get it attested by his branch bank manager (to which the beneficiaries demat trading account is affiliated with). While sending the details back to the RTA, the beneficiary is also expected to send a photocopy of valid identity (Aadhar/Pan card, passport).

Similarly, it is possible that the format of the name mentioned by the beneficiary in the demat account is differently recorded in the original physical certificate. For example, the beneficiary’s name that was documented as “S Arun” appears as “Arun Sundar” in his demat account.

Here, similar to the signature mismatch case, the RTA sends back a clarifications document (an affidavit) that needs to be filled and sent back by the beneficiary.

However, besides sending proof of valid identity (Pan or Aadhar card) along with the affidavit to RTA, the affidavit needs to be attested by a qualified notary. However, this should not be a cause for concern. You must be able to get the notary attestation for a nominal fee.

Opening a joint account

In case the shares are held jointly, the beneficiaries (generally married couples) are expected to have a joint demat account. This can be opened for a nominal sum of ?300 before transferring the shares to it. However, it is not mandatory to open a joint account.

The joint share certificate can be transferred to a single account holder using a transfer deed obtained from RTA. Here, a stamp charge of 0.25 per cent of the market value (of the stock) is levied.

But it is advisable to take the demat route rather than transfer share certificates through a transfer deed. In the demat route, the DP indemnifies the loss of shares or any damage that can happen to the share certificates during transit. So, in case of a damage or loss of shares at any stage, the DP takes on the liability to compensate you for all the losses.

Owner’s death

Besides, it is possible that the actual beneficiary of the physical certificates is not alive and there is no joint owner for the share certificate. In such a case, the legal heir (usually sons, daughters and spouse of the owner), after a probate process, is required to transfer the shares to a single person.

The shares get credited to this chosen person’s demat account after approval by RTA.

Besides, the respective RTA expects few other documents (copy of death certificate, succession certificate and probate process letter of administration attested by court officer) to be submitted for verification before the transfer of ownership. But if the value of the stocks involved is high, the RTA can also ask for additional documents for further clarifications.

The specific document requirement (including the documents after the probate process, if any) depends on the discretion of the RTA.

The Hindu, New Delhi, 08th September 2017


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