What is depository and dematerialization?
What is depository and dematerialization?
Dematerialisation is a process through which physical securities such as share certificates and other documents are converted into electronic format and held in a Demat Account. A depository is responsible for holding the securities of a shareholder in electronic form.
What does dematerialisation of securities mean?
In finance and financial law, dematerialization refers to the substitution of paper-form securities by book-entry securities. The dematerialization of securities such as stocks has been a major trend since the late 1960s, with the result that by 2010 the majority of global securities were held in dematerialized form.
What is the process of dematerialisation under the Depositories Act 1996?
[2] Dematerialization is the process of converting physical holdings into electronic form with the depository wherein the share certificates are shredded and corresponding entry of the number of shares is done in the opened with the depository.
What is the procedure for dematerialisation of securities under the depository system?
opening, the investor needs to shortlist a Depository Participant (DP) that offers Demat services. submit a request to the DP in the Dematerialisation Request Form (DRF) for dematerialisation along with the certificates of securities (Share Certificates) to be dematerialised.
How do depositories work?
A depository works as a link between the listed companies which issue shares and shareholders. It issues these shares through agents associated with it called depository participants or DPs. The investor, at the end of a transaction receives a confirmation from the depository.
What is the process of dematerialisation?
Dematerialization is the process of converting your physical shares and securities into digital or electronic form. The basic agenda is to smoothen the process of buying, selling, transferring and holding shares and also about making it cost-effective and foolproof.
What are the benefits of dematerialisation of shares?
Dematerialization is the process of converting physical share into electronic format….Benefit for brokers
- It provides greater profit due to increase in volume of trading.
- Eliminates the chances of forgery and bad delivery.
- Increases the trading efficiency, profitability and confidence in investors.
How long does it take to demat shares?
This entire process of conversion of physical share certificates into dematerialized form is likely to take around 2 to 3 weeks. Once your demat account gets credited, you are free to either sell or transfer your shares as and when you need.
What is the purpose of Depositories Act, 1996?
The Depositories Act, 1996 was enacted with the objective of ensuring free transferability of securities with speed, accuracy, and security, by making securities of public companies freely transferable subject to certain exceptions by restricting company’s right to use discretion in effecting the transfer securities …
What are the rights and obligations of depositories under Depositories Act, 1996?
(1) Every depository shall, on receipt of intimation from a participant, register the transfer of security in the name of the transferee. (2) If a beneficial owner or a transferee of any security seeks to have custody of such security, the depository shall inform the issuer accordingly.
How many depositories are registered with SEBI?
two Depositories
How many Depositories are registered with SEBI? At present two Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) are registered with SEBI.
What are the benefits of participation in a depository?
The benefits of participation in a depository are :
- Immediate transfer of securities.
- No stamp duty on transfer of securities.
- Elimination of risks associated with physical certificates such as bad delivery , fake securities etc.
- Reduction in paperwork involved in transfer of securities.
- Reduction in transaction cost.
Can unlisted companies issue shares in dematerialised form?
Every unlisted Public company can issue shares only in dematerialised form in accordance with provisions of the Depositories Act, 1996 and regulations made there under
What is Depositories Act 1996?
The Depositories Act 1996 has been enacted to regulate the matters related and incidental to the operation of Depositories and demat operations. Two Depositories are in operation –
What is dematerialization of shares?
Dematerialization of shares is optional and an investor can still hold shares in physical form. However, he/she has to demat the shares if he/she wishes to sell the same through the Stock Exchanges. Similarly, if an investor purchases shares, he/she will get delivery of the shares in demat form only.
What is the role of Depository Participants in share market?
The Depository Participants gives the list of demat account holders and the number of shares held by them in electronic form on the Record date to the company (Beneficiary Persons, known as Benpos). The rights of the shareholders holding shares in demat form are at par with the holders in physical form.
