How to deal with paper securities rendered illiquid now

If you hold physical securities in listed companies, you can’t transfer them by way of sale on the stock exchange or an off-market transaction between the buyers and sellers, with effect from 1 April. The initial deadline set by the Securities and Exchange Board of India (Sebi) was set at 5 December 2018, which was extended to 31 March.

ISTOCKSecurities held in physical or paper form after April 1 2019 are illiquid. This means that you will no longer be able to sell or transact without first dematerializing them. However, it does not take away the validity of the securities or the rights and benefits under them.

Sebi has clarified that in case of the death of the holder of paper securities, they can be transferred to the legal heirs. But any sale or transfer by the legal heirs is possible only after the securities are converted to demat form.

Physical certificates can be submitted by investors even after the deadline to apply for transposition or rearranging of the holder’s names as they appear in the certificate. This is an important step before dematerialization that can help reduce the number of demat accounts that need to be opened.

If you have sold the securities in physical form before 31 March, but for some reason the transfer deed used to give effect to the transfer was found to be deficient and returned to the seller, then it can be re-submitted for transfer after making the corrections even after this date.

WHAT YOU SHOULD DO

The purpose of dematerialization is to prevent the risks of fraudu- lent transactions, transfers and disputes associated with holding paper securities.

If you already have a demat account and the physical shares have the same holding pattern, then you can dematerialize the shares in the same account.

If the holders are the same but the holding pattern is different, then you should make a transposition request to rearrange the holding pattern to align to that of the demat account and then dematerialize the shares.

If you have to open a new demat account, then reduce the number of accounts you need to open by managing the holding patterns of the securities first. This will bring down the costs of holding and trading in the securities.