The idea of dematerialization or how to transfer shares of an unlisted public company isn’t new in India. Recorded organizations in India had moved from paper share authentications to the electronic-structure, for example, dematerialized structure route back in the year 1996. Then again, there was no such command in the event of unlisted public organizations until second October 2018, prompting examples of fake offer exchanges and different questions that brought about undesirable prosecution and difficulty for the genuine investors. And other questions like how to sell shares of unlisted companies in India
Dematerialization of securities would have its own arrangement of difficulties on the off chance that there are move limitations appropriate on unlisted organizations enforceable through agreements. One may have an uncertainty whether public organizations can at all have move limitation when it has been unmistakably expressed under CA13 that the portions of a public organization are uninhibitedly transferrable. Notwithstanding, the stipulation to Section 58(2) of CA13 states an exemption for the aforementioned general arrangement, where offer exchange limitation can be upheld via an agreement or course of action. Babli investments is one of the leading platforms to buy unlisted shares.
PROCEDURE FOR DEMATERIALISATION OF SHARES:
- Beneficiary Owner (BO) has to open a Demat account with a Depository participant (DP) and obtain an account number.
- The client (registered owner) will submit a request to the DP in the Dematerialisation Request Form (DRF) for dematerialization, along with the certificates of securities to be dematerialized. Before submission, the client has to deface the certificates by writing “SURRENDERED FOR DEMATERIALISATION“.
- The DP will verify that the form is duly filled in and the number of certificates, number of securities, and the security type (equity, debenture, etc.) are as given in the DRF. If the form and security count is in order, the DP will issue an acknowledgment slip duly signed and stamped, to the client.
- The DP will scrutinize the form and the certificates. This scrutiny involves the following:
- Verification of Client’s signature on the dematerialization request with the specimen signature (the signature on the account opening form). If the signature differs, the DP should ensure the identity of the client.
- Compare the names on DRF and certificates with the client account.
- Paid-up status
- ISIN (International Securities Identification Number)
- Lock – in status
- Distinctive numbers
- In case the securities are not in order, they are returned to the client, and acknowledgment is obtained. The DP will reject the request and return the DRF and certificates in case:
- A single DRF is used to dematerialize securities of more than one company.
- The certificates are mutilated, or they have defaced in such a way that the material information is not readable. It may advise the client to send the certificates to the Issuer/ R&T agent and get new securities issued in lieu thereof.
- Part of the certificates pertaining to a single DRF is partly paid-up; the DP will reject the request and return the DRF along with the certificates. The DP may advise the client to send separate requests for the fully paid-up and partly paid-up securities.
- Part of the certificates pertaining to a single DRF is locked-in, the DP will reject the request and return the DRF along with the certificates to the client. The DP may advise the client to send a separate request for the locked-in certificates. Also, certificates locked-in for different reasons should not be submitted together with a single DRF
- In case the securities are in order, the details of the request as mentioned in the form are entered in the DPM (software provided by NSDL to the DP) and a Dematerialisation Request Number (DRN) will be generated by the system.
- The DRN so generated is entered in the space provided for the purpose in the dematerialization request form.
- DP would setup a Demat request on the CDSL or NSDL system.
- The DP will then despatch the certificates along with the request form and a covering letter to the Issuer/ R&T agent.
- The Issuer/ R&T agent confirms acceptance of the request for dematerialization in his system DPM (SHR) and the same will be forwarded to the DM if the request is found in order.
- The DM will electronically authorize the creation of appropriate credit balances in the client’s account.
- The DPM will credit the client’s account automatically.
- The DP must inform the client of the changes in the client’s account following the confirmation of the request.
- The issuer/ R&T may reject dematerialization requests in some cases. The issuer or its R&T Agent will send an objection memo to the DP, with or without DRF and security certificates depending upon the reason for rejection. The DP/Investor has to remove reasons for objection within 15 days of receiving the objection memo. If the DP fails to remove the objections within 15 days, the issuer or its R&T Agent may reject the request and return DRF and accompanying certificates to the DP. The DP, if the client so requires, may generate a new dematerialization request and send the securities again to the issuer or its R&T Agent. No fresh request can be generated for the same securities until the issuer or its R&T Agent has rejected the earlier request and informed NSDL and the DP about it.
Dematerialization of securities has different advantages for all quarters.
Advantages for security holders
(I) Fast and helpful exchange securities.
(ii) No stamp obligation is to be joined on securities instruments.
(iii) No dangers relating to actual testaments e.g., phony, harmed, dirty, ravaged declarations, awful conveyance, postal deferrals, robberies, and so forth
(iv) Less administrative work and exchange costs.
(v) No compelling reason to part with authentications to sell just a piece of securities.
(vi) Transmission of securities is affected by a depositary member, no requirement for the security holder to tell/cooperate with the organization.
Advantages to the organization
(I) Reducing the expense of new issues because of lower printing and dispersion costs.
(ii) Raising productivity level of Registrars and move specialists and the Secretarial Department.
(iii) Expeditious help to investors.
Advantages to intermediaries
(I) Reduction in deferred settlement hazard.
(ii) More business because of expansion in the volume of exchange.
(iii) No degree for terrible conveyance or fabrication.