As per the notification issued by SEBI on 8 June 2018, SEBI is aiming for 100% dematerialisation of shares within the target date of 5 December 2018. This means all existing physical shares will be required to be converted into dematerialised form on or before 5 December 2018. Post 5 December 2018, transfer of physical shares will not be permitted, with the exception of the share certificates held under a legal will.

Step-by-step procedure to convert physical shares to Demat:

Holders of share certificates in the physical form can quickly get their shares converted into dematerialised form by following some simple steps as given below:

Step 1: The opening of a Demat Account

This is the most essential and the very first step required to convert share certificates into dematerialised form as you will need a Demat account to hold your share/shares.

Find below steps to open a Demat Account

1. Contact a Depository Participant who is registered with SEBI
2. Fill an account opening form
3. Submit your KYC documents along with a filled application form to your DP
4. Sign an agreement along with a schedule of charges with the DP/bank. This agreement will provide and mention the responsibilities and the rights of both the account user and the DP
5. You will then be provided with a Demat account number, using which you can start trading in the stock markets with your Demat account

Step 2: Process of transferring physical shares into dematerialised form

1. Contact your DP for a DRF Form, which is also known as a Dematerialization Request Form
2. Fill up the DRF form and submit the same to your DP along with your share certificates (On each share certificate, ‘Surrendered for Dematerialisation’ needs to be mentioned)
3. Within two to three weeks, subject to successful verification of the DRF form submitted, and authentication of your share certificates, you will receive an electronic request, and your physical shares will be converted into dematerialised form and transferred to your Demat account

Step 3: Dispose off physical share certificates

The physical share certificates can now be destroyed as you will no longer need to safeguard them

You can now easily sell or transfer your shares in Demat form in a matter of seconds, which was not possible with physical share certificates.

Disadvantages of Using Physical Share Certificate for Trading of Shares

Some of the disadvantages of trading or holding shares using physical share certificates are listed below:

1. Need to be stored safely and securely under lock and key as physical share certificates are exposed to the risk of theft and loss. share certificates can also suffer from wear and tear damages etc.
2. Transactions using physical share certificate are time-consuming and tedious involving multiple steps which need to be undertaken, whereas transaction of shares in Dematerialised form can be completed in a matter of seconds
3. Any transaction involving physical share certificate attracts stamp duty payments whereas share transaction using dematerialised shares do not attract any stamp duty payment/liability/expenses