Dematerialization of Securities -Navigating the Process and Laisoning with RTA.pdf

Demat (Dematerialization) converts physical securities into electronic form, stored in a Demat account managed by a Depository Participant (DP). This process, facilitated by Registrars and Share Transfer Agents (RTAs), ensures streamlined trading and ownership. All public companies and certain private companies must comply by September 2024.

1. CS Sachin Kotian| Affluence Advisory Pvt. Ltd. | Website - www.affluence.net.in |Email - [email protected]

Dematerialization of Securities -
Navigating the Process and Laisoning with RTA
Affluence Advisory Pvt. Ltd.
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WHAT IS DEMATERIALIZATION?
The process of converting the physical certificates of an investor into an electronic form is known
as Dematerialization. This Process aims to eliminate the need for physical share certificates and
streamline share trading and ownership. There is an account called the Demat Account where these
shares and securities are maintained in electronic form.
A Depository Participant (DP) is described as an Agent of the depository. They are the
intermediaries between the depository and the investors. The relationship between the DPs and the
depository is governed by an agreement made between the two under the Depositories Act.
Dematerialization is essentially the transition from physical stock certificates to digital records
WHAT IS A DEPOSITORY?
A depository is an organization that holds securities (like shares, debentures, bonds, government
securities, mutual fund units etc.) of investors in electronic form at the request of the investors
through a registered Depository Participant. It also provides services related to transactions in
securities.
At present two Depositories viz. National Securities Depository Limited (NSDL) and Central
Depository Services (India) Limited (CDSL) are registered with SEBI.
WHO IS A DEPOSITORY PARTICIPANT?
A Depository Participant (DP) is an agent of the depository through which it interfaces with the
investor and provides depository services.
Public financial institutions, scheduled commercial banks, foreign banks operating in India with
the approval of the Reserve Bank of India, state financial corporations, custodians, stockbrokers,
clearing corporations /clearing houses, NBFCs and Registrar to an Issue or Share Transfer Agent
complying with the requirements prescribed by SEBI can be registered as DP.
Banking services can be availed through a branch whereas depository services can be availed
through a DP.
REGISTRAR AND SHARE TRANSFER AGENT (RTA)
Registrars or transfer agents (RTA) are the trusts or institutions that register and maintain detailed
records of the transactions of investors for the convenience of mutual fund houses. For carrying
out the business as RTA it has to get registered with Securities and Exchange Board of India
(SEBI). They assist businesses that have issued shares to the public with share registry
bookkeeping and share transfer operations in electronic form.

2. CS Sachin Kotian| Affluence Advisory Pvt. Ltd. | Website - www.affluence.net.in |Email - [email protected]

Dematerialization of Securities -
Navigating the Process and Laisoning with RTA
Affluence Advisory Pvt. Ltd.
td
Registrar & share transfer agent plays an important role in the complete procedure of share transfer
as well as documentation on behalf of the investor and mutual fund houses. They carry all the
background documentation in check for actively supporting the fund house and investors data
requirements from time to time.
APPLICABILITY OF MANDATORY DEMATERIALIZATION:
 Every Public Company.
 Every Private Company, other than small companies and Government companies.
A Private Company (other than a company that is a small company as on 31st March 2023) is
required to comply with mandatory dematerialization of securities within a period of 18 months
from the end of FY 2022-2023, i.e., on or before 30th September 2024
STEPS INVOLVED IN DEMATERIALIZATIO N OF SHARES:
1. Taking decision with which depository ISIN to be generated (i.e. NSDL and/or CDSL),
which depends on where the shareholders have a Demat account.
2. For ISIN Generation carry out the documentation activity for respective depository and
submit to RTA for onward submission to respective depository/ies.
3. If shareholders don’t have a Demat account get in touch with a Depository Participant (DP)
to open of Demat account (Demat account opening activity can be carried out
simultaneously with ISIN generation (The Process is mentioned below)
4. Once ISIN is generated, share the shareholders' data and Specimen signature with RTA for
updating in their system.
5. Intimate shareholders to get in touch with DP and submit a Dematerialization Request
Form (DRF) with KYC and original Share Certificates.
6. DP will send the DRF with KYC and share certificate to RTA for conversion of physical
shares into Demat (i.e. Electronic)
STEPS INVOLVED IN DEMATERIALIZATION OF THE PHYSICAL SHARES OF
SHAREHOLDERS:
1. Open a Demat Account: The first step is to open a Demat account with a registered
Depository Participant (DP). Choose a DP that is affiliated with a recognized depository
such as NSDL or CDSL.

2. Collect Dematerialization Request Form (DRF): Obtain a Dematerialization Request
Form (DRF) from your DP. This form is used to request the conversion of physical share
certificates into electronic form.

3. CS Sachin Kotian| Affluence Advisory Pvt. Ltd. | Website - www.affluence.net.in |Email - [email protected]

Dematerialization of Securities -
Navigating the Process and Laisoning with RTA
Affluence Advisory Pvt. Ltd.
td
3. Fill the DRF: Fill out the DRF with accurate details including your Demat account
number, company name whose shares you want to dematerialize, details of physical share
certificates (certificate numbers, folio numbers, etc.), and other required information.

4. Submit Documents: Submit the filled DRF along with the physical share certificates to
your DP. Ensure that all documents are properly filled in and signed.

5. Verification by DP: The DP will verify the documents and forward them to the Registrar
and Transfer Agent (RTA) of the respective company.

6. Verification by RTA: The RTA will verify the documents received from the DP. This
includes verifying the authenticity of the physical share certificates and ensuring that they
match the details provided in the DRF.

7. Dematerialization Process: Once the documents are verified, the RTA will initiate the
dematerialization process. The physical share certificates will be cancelled, and equivalent
electronic shares will be credited to your Demat account.

8. Confirmation: You will receive a confirmation from your DP once the dematerialization
process is completed. This confirmation will include details of the shares dematerialized
and credited to your Demat account.

9. Check Demat Account: Log in to your Demat account to verify that the electronic shares
have been credited successfully. Ensure that the details of the credited shares match the
physical certificates submitted.

10. Update Records: Keep records of the dematerialized shares and update your investment
portfolio accordingly. It's important to maintain accurate records for future reference.

11. Liaison with RTA: If you need to communicate with the RTA regarding any issues or
queries related to your shares, you can contact them directly. RTA contact details are
usually available on the company's website or through your DP.

12. Regular Monitoring: Regularly monitor your Demat account for any changes in
shareholding, corporate actions, or communication from the RTA. Stay informed about
developments related to the companies in which you hold shares.

4. CS Sachin Kotian| Affluence Advisory Pvt. Ltd. | Website - www.affluence.net.in |Email - [email protected]

Dematerialization of Securities -
Navigating the Process and Laisoning with RTA
Affluence Advisory Pvt. Ltd.
td
CONCLUSION:
As a result, registrars and share transfer agents guarantee the efficient operation of processes and
play a crucial part in the dematerialization and digitization of society. The issuer's agent is known
as an RTA (Registrar and Transfer Agent), and it serves as a go-between for the issuer and the
depository to enable services including corporate actions, initial public offerings,
dematerialization, and rematerialization.

Disclaimer: This article provides general information existing at the time of preparation and we
take no responsibility to update it with the subsequent changes in the law. The article is intended
as a news update and Affluence Advisory neither assumes nor accepts any responsibility for any
loss arising to any person acting or refraining from acting as a result of any material contained
in this article. It is recommended that professional advice be taken based on specific facts and
circumstances. This article does not substitute the need to refer to the original pronouncement