“Dematerialization” also known as “demat” is the elimination of physical certificates or documents of title which represents ownership of securities so that securities exist only as accounting records” It is the process of converting securities (shares, bonds etc.) held in physical forms (certificates) into electronic form credited to the demat account of the individual owners.
What are you dematerializing?
What you are dematerializing is your ordinary shares certificates and bonds certificates which are converted into electronic statement of account holding (demat form).
Why are you dematerializing?
You are dematerializing to make your holding of shares in companies more convenient for you to track, to also make sale of your shares quick and easy.
Benefits of Demat to an Investor
• Easy and convenient way of managing and tracking share holding especially shareholding in many companies. No matter the varieties and volume of shares owned by an investor, it could be reduced to just a one page statement of account whose entries can easily be verified and monitored.
• Reduction in transaction cost; certain costs can now be avoided
such as cost of printing certificates and stamp duty.
• Sale of shares is made faster and easier for shareholders since they do not need to send their certificates for verification before selling them.
• Transfer of securities is made quicker.
• Makes for easy and fast allotment of shares during IPOs.
• Bonus shares declared are credited directly to the investors’ CSCS account which can be monetized.
How can I Dematerialize My Shares?
To dematerialize your shares, you need to do the following:
• Open a CSCS account today using your stockbrokers’ if you do not have one already.
• Surrender all the share certificates you want to dematerialize to the company’s registrars through your stockbroker along with the duly completed prescribed forms.
As you complete the forms pay attention to the names andthe order in which they appear on the certificates to ensure you maintain the same order in the forms.
• The registrar, upon receiving the completed forms from your broker, will confirm your details and signatures on the forms and if satisfied will send them to the depository called Central Securities Clearing System (CSCS) for dematerialization into electronic statements of shareholding.
• You will then receive a CSCS statement showing all the shares you hold in the different companies and their quantities.
• You can then cross check the CSCS statement to ensure that all the certificates you submitted have been entered.
Can I Use my Dematerialized Shares to Borrow Money?
Of course yes, all you need to do is to approach your bankers with the CSCS statements of your shareholding and complete their prescribed forms by which procedure you would pledge the dematerialized shares to the bank. The lender bank will then place a lien on the shares in question by submitting your duly executed forms along with your submitted CSCS statements to the Central Securities Clearing System (CSCS) for authentication. Once this process is completed, the borrower cannot access the shares until the lien on the shares is lifted by the CSCS upon repayment of the loan.
What happens to bonus shares and dividends declared during the pledge?
The bonus shares and dividends declared during the pledge will still be yours provided that you repay the underlying debt with interest at the stipulated period.
Whom shall I inform of changes in my address or bank details?
You will simply complete the change of address forms with your stockbroker who will then send them to the Central Securities Clearing System (CSCS).
Indeed the process has already commenced with the setting up of CSCS. It is just that some share certificates are still in physical form, however, the modalities for the final conversion of all share certificates to demat form have been put in place, and the deadline for final conversion will soon be announced. So you have to prepare yourself to take advantage of the opportunities by first of all opening a CSCS account now with your stockbrokers.