Why hold shares in Demat Form
Why is holding shares in Demat form preferred?
The first and foremost reason why holding shares in dematerialized form is preferred over physical share certificates is because of the following reasons.
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- Easy liquidity. Monetizing your physical shares has the possibility of turning out to be a frustrating experience.
- No one would purchase your share in physical form.
- Share certificates have the possibility of getting lost, get mutilated, or get destroyed. Let me tell you about a real incident. A new client of ours brought a small bag containing share certificates destroyed by white ants. The value of the shares could be worth well over rupees 15 lakhs. You can imagine his plight and the long process he has to go through to get the duplicate certificates issued by each company.
- It has the possibility of being subject to fraud.
- The process of transferring physical shares to another person is quite cumbersome. The certificates have to be sent to the company that issued it where they will verify whether it is genuine and whether the signature matches their records. In the case of signature mismatch, a banker verification has to be provided before the new shareholder's name is entered in their records and an endorsement made on the certificate. All of this will take time.