A Demat account, short for Dematerialised Account, is an account used to hold shares and other securities in electronic form instead of physical paper certificates. Just as money can be held in a bank account instead of cash, securities can be held electronically in a Demat account.
Before dematerialisation became common in India, investors generally received physical share certificates as evidence of their ownership. Many families still have these old certificates at home because their parents or grandparents purchased shares decades ago. Today, these old investments may need to go through the physical shares to demat process before they can be held electronically.
Why Were Shares Dematerialised?
Holding shares in physical form created several practical challenges. Certificates could be lost, damaged, misplaced or affected by changes in the shareholder's address and personal details. Transferring physical certificates could also involve paperwork and verification. The introduction of the Indian depository system allowed investors to hold securities electronically. NSDL was established in 1996, followed by CDSL in 1999. Over time, electronic holding became the normal way for investors to maintain and manage their securities.
Dematerialisation reduces the need to maintain physical certificates and makes securities easier to hold, monitor and transfer through the applicable systems.
What Happens to Old Physical Share Certificates?
Finding an old certificate does not automatically mean that the investment is lost. The certificate may contain important information such as the shareholder's name, folio number, certificate number and distinctive numbers. However, an old certificate may not always reflect the current status of the investment. The shareholder's details may have changed, dividends may have remained unpaid, the original shareholder may have passed away, or the shares may have undergone corporate actions such as bonus issues or stock splits. This is why the physical shares to demat process can involve more than simply submitting a certificate.
The shareholder or eligible claimant may first need to establish ownership, update KYC and other records, complete applicable transmission or succession formalities, and satisfy the requirements of the concerned company or Registrar and Transfer Agent (RTA).
How Does Physical Shares to Demat Work?
The physical shares to demat process generally involves verifying the old share certificate and shareholder information, preparing the required documents, and submitting the dematerialisation request through the applicable process. If the original shareholder is still living, the process may be different from a case where the shareholder has passed away. Where legal heirs are involved, additional succession or transmission documentation may be required.
Name mismatches, lost certificates, multiple legal heirs, outdated records and other circumstances can also make the physical shares to demat process more complicated. This is where professional assistance can be useful. Swasam Investments helps clients understand the documentation required for their particular case and coordinates with the concerned company or RTA during the applicable process.
What If the Shares Are With IEPF?
Some older investments may have been transferred to the Investor Education and Protection Fund (IEPF) under the applicable provisions. In such cases, the normal dematerialisation process may not be sufficient. An eligible shareholder or legal heir may need to follow the prescribed IEPF claim process to seek recovery of the applicable shares and associated amounts.
Swasam Investments assists clients with the documentation, verification and coordination involved in an IEPF claim, particularly where old physical certificates, deceased shareholders or legal heirs are involved.
Why Should You Check an Old Certificate?
An old physical certificate can be the starting point for discovering an investment that a family may have forgotten about for years. Before discarding or ignoring it, the available shareholder and company details should be checked. The physical shares to demat process helps eligible securities move from paper records into electronic holdings, while IEPF-related cases may require a separate recovery procedure.
If you have an old physical share certificate belonging to yourself, your parents or grandparents, Swasam Investments can help you understand its current status, identify the applicable process and coordinate the required formalities.
Contact our team to discuss your old share certificate and understand the appropriate next steps.