Procedure for Transfer of Dematerialized Shares: A shareholder may keep his share in physical form. But, according to new provision he cannot sell his share in physical form. If he wants to sell his share, he has to go for dematerialized process.
Demat share means to convert physical share in to electronic form in a specified way. The investor has to open a demat account with a depository participant. In India, as a depository participant, National Securities Depository Limited (NSDL) or Central Depository Services (India) Limited (CDSL) are functioning as an agent for deposit care taker. On behalf of these institutions, PSU Banks or Private Bank and other Financial Institutions open demat accounts. After opening this account, the said institution provides an instruction slip to account holder. It is used by the account holder for purchase or sale of Securities; (image of instruction slip is on next page). The company can observe its shareholders and their holdings on web site provided by NSDL/CDSL. However, the company cannot make any changes in it.
As per the instruction slip Broker / Bank / Financial institution will purchase or sell the shares. Purchasing or selling process is done online on computer.
A person who wants to purchase share has to pay the price of the share and stamp duty along with brokerage. The total amount of purchase is debited from his account and purchased shares are credited into his account (Shares are increased in shareholder's account). Similarly, if shareholder sells his shares, the amount of the sale (after deducting brokerage, tax and other changes) is deposited to his bank account and the shares sold are debited to his demat account (shares are decreased in his account). Thus, shares are credited or debited to a person's demat account.
It is important to note that when shares are purchased or sold in this way the company has no control over it. Company has nothing to do with it.. The whole procedure is done by the institution which functions as agent of NSDL/CDSL.The Company can only observe, its newcomer shareholders and outgoing shareholders, on the web page.