You won’t be able to transfer physical shares from Dec 5

Investment in shares & insurance is a smart option. Investment Biz Mag recommends people to invest in the best stock & shares. The SEBI has launched one new rule regarding physical transfer of shares. From 5^th December onwards, one will not be able to physically transfer the shares of listed companies.  Share Market regulator SEBI (Securities & Exchange Board of India) has set a deadline of December 5^th when shares of the listed company will be transferred only in demat form. Demat shares as well as physical shares were transferred before December 5^th. This Finance blog will help you to know some of the issues related to this rule:

• Why has this rule come into effect?

There are several reasons why this rule has been launched. One of the main reasons is there have been tremendous frauds related to physical shares. There were several unclaimed dividends & issues related to transfer of the shares. Whereas in case of dematerialised shares, a bank account is linked to the demat account. This will mainly limit the fraudulent activities related to physical shares.

• With all physical shares of all listed companies become worthless?

The SEBI rule doesn’t shrink away the value of original physical shares. So, physical shares will retain its original value. These shares will be transferred as illiquid shares. This simply means one has to transfer the physical shares to official demat & then sell in the market to fetch the real value of those shares. Investors who wants to retain their shares, can surely keep them in physical form.

• How to sell physical shares held by a deceased person?

If the value of shares is up to Rs. 2 lakhs, the legal authorized person can approach the company whose shares the authorized person possess. All one need is death certificate, physical shares to change the name of owner. If the amount is more than Rs.2 Lakhs, then the authority has to appoint a lawyer to finish the procedure.

• What happens in case one of the joint owners is dead?

If one joint owner is dead, then the other joint owner of shares can approach the company to sell the shares or transfer them into demat form.  Then the company will transfer ownership status in the name of joint owner.

• What challenges are companies, registers & transfer agents facing?

Investors who have physical shares are bound to follow the rules & regulations prescribed by SEBI & the Companies Act related to Demat form.