Dematerialization of shares is the process of converting your physical stocks into digital form so that they can be transacted electronically.
There was a time in Nepal when a company would issue share certificates to investors. Everyone had to use Share certificates in both the primary as well as the secondary market. But since Magh 2072 BS, CDSC has made it mandatory to Dematerialize all the share certificates. Meaning no share certificates can be transacted directly and any existing certificates need to be dematerialized. It is basically the process to convert these certificates so that they can be electronically traded.
If you or someone in your family or friends had been in the stock market since before 2016, then you may have some share certificates lying in your drawer. If you don’t know what to do about these certificates, you’ll learn everything you need to know before you can get those shares dematerialized.
Here’s a sample physical share certificate of Upper TamaKoshi Hydropower Limited.
If you or someone in your family have these types of certificates, you need to demat them so that they can be shown on your account and can be sold on the secondary market.
Before the implementation of dematerialization, all the shares were issued and traded in physical form by means of the certificate just like the one above. But, after the implementation of dematerialization, all these transactions can be done digitally and no such certificates are issued.
Dematerialization of shares has made it easy to manage and access the stocks, prevents the loss of stocks due to physical phenomenon, and made the process of stock-related transactions easier and faster.
Let’s get into the process of dematerializing your physical shares in Nepal.
1. Open a Demat Account
Before you can Demat your physical shares, you need to have a Demat account. A Demat account can be opened with Depository Participants.
The person who has opened a Demat account to deposit securities through a DP is called the beneficiary.
2. Submit DRF Along With The Certificates
On the next step, you’ll have to visit your DP with whom you had opened a Demat account. The beneficiary has to visit the DP along with all the physical share certificates s/he wants to dematerialize.
You’ll have to fill and submit a Dematerialization Request Form(DRF) with all the required details and surrender the certificates to the DP. You must make sure that your signatures match the signatures on DP and signatures on the company of the shares. You need to fill different DRFs to Demat the shares of different companies.
Here’s a sample Dematerialization Request Form from “Muktinath Capital”.
Once you have submitted the Demat Request form with all the correct details, all other work is handled by your DP. The DP sends your request to the company’s appointed registrar. When the request is verified and approved, the physical share certificates are destroyed and are credited to your Demat account. It may take somewhere around 10-15 days depending on your DP to get those shares credited to your Demat account.
Once these shares have been accredited to your Demat account, you can now sell these stocks on the secondary market.
In this way, physical share certificates can be easily dematerialized in Nepal.
The dematerialization can be done on the Demat account of the same beneficiary whose name is mentioned on the share certificates.
In case of a merger of the company with a new company, contact the share registrar of the new company.
After the implementation of Demat accounts in Nepal, all the dividends and bonus shares are credited digitally. Contact the share registrar in case you haven’t received the old bonus and right share certificates.
I hope this article will help you understand how to demat physical share certificates in Nepal. Make sure to share this so it reaches more investors.
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