There is a persistent belief that physical share certificates were abolished and are now worthless paper. They were not, and they are not. But something did change, and the change is enough to strand a holding indefinitely if nobody acts on it.
The short version: you may still hold shares in physical form. You may not, in the ordinary way, transfer them.
What changed, and what didn’t
The market regulator moved the transfer of listed securities into dematerialised form only. Since that took effect, a company’s registrar will not process a transfer of shares presented as paper certificates.
Two things are worth separating out, because conflating them causes most of the confusion.
Your ownership is unaffected. A certificate in your name still evidences a holding on the company’s register of members, and you remain entitled to dividends, bonus issues, rights issues and voting.
Your ability to do anything with it is not. Selling requires a transfer. So does gifting. Both now require the shares to be in demat form first. Until they are, the holding is real but frozen in place.
Transmission — what happens on the death of a holder — is treated differently, because it arises by operation of law rather than by choice. But even there, the shares generally end up needing to be dematerialised for the heir to do anything with them.
What dematerialisation actually is
It is a change of format, not a change of ownership. The certificate is surrendered and cancelled, and an equivalent electronic holding is credited to a demat account in the same name. Nothing is sold, nothing is transferred to anyone else, and no tax event occurs because no disposal has happened.
People sometimes resist this, understandably — the paper feels like the asset and giving it up feels like risk. It is worth being clear that the certificate was never the asset. The entry on the register of members is the asset. The certificate was evidence of it, and the demat holding is better evidence of the same thing.
What the process asks for
Broadly, in order:
- A demat account in exactly the name on the certificate. Joint holdings must go into an account with the same holders in the same order — where the order differs, that is a transposition, which is a separate step and easy to miss.
- A dematerialisation request submitted through your depository participant, with the original certificates.
- The certificates themselves, which are defaced and forwarded to the company’s registrar.
- Verification by the registrar against the register of members — the name, the folio, the distinctive numbers, the holder’s signature against the specimen on file.
- Credit to the demat account once that verification completes.
Where the folio’s KYC is incomplete — no PAN, no bank details, no nomination, an address that was never updated — that generally has to be brought up to date first, using the investor service request forms the registrar prescribes. Our note on the ISR-1 form covers what that involves.
Where this collides with an old holding
For a folio that has been active and correct all along, dematerialisation is administrative. For the holdings we usually see, it is where several long-standing problems surface at once, because the registrar is now checking things nobody has checked in thirty years.
The recurring collisions:
The name doesn’t match. The demat account is in your full name; the certificate has initials. The two must reconcile before the credit can happen, and that is its own piece of work.
The signature doesn’t match. The specimen on file was given decades ago. Banker’s attestation is the usual route.
The company has been renamed or merged, so the certificate names an entity the current registrar does not service under that name. The entity history has to be established first.
The holder has died, in which case this is not a dematerialisation problem at all — it is transmission, and demat comes after.
The dividends already went to IEPF. If the folio sat untouched long enough, the shares may no longer be with the company at all. Dematerialising what remains and claiming what was transferred are two different processes that have to be sequenced correctly.
If the certificate is lost
Losing the paper does not lose the holding, and it does not prevent dematerialisation — it adds a step. A duplicate has to be issued first, which involves establishing the loss and indemnifying the company against a competing claim.
Worth knowing: duplicate certificates are now generally issued in dematerialised form directly, rather than as fresh paper. So in a lost-certificate case the two processes fold into one. Our page on duplicate certificates sets out how that runs.
The reason not to leave it
A physical holding that nobody touches does not stay static. Dividends go uncollected. Uncollected dividends accumulate. After seven consecutive years of that, the shares themselves follow the dividends into IEPF — at which point recovering them is a materially longer process involving a different authority.
That is the actual cost of doing nothing: not that the shares disappear, but that each year of inaction moves them one step further from you and adds a process to getting them back.
If you are holding certificates and are not sure what state the folio is in, that is what a records check establishes — what the registrar shows, whether anything has already moved, and which of the problems above you are actually dealing with. See physical shares to demat.