Physical share certificate is stock of physical paper certificate which acts as evidence of ownership for the concerned shares whereas transfer of shares is the sale purchase of share certificate between the buyer or transferor and the seller or transferee.
On 8th June 2018, The Securities and Exchange Board of India (SEBI) intimated the companies that physical shares cannot be transferred if not dematerialised before 1st April 2018.
It is a process to convert existing physical shares to electronic format. For conversion, a person is required to open a Demat account with depository participant and file a dematerialisation request form along with his share certificates. The conversion is maintained in an account with the depository participant.
Dematerialisation of shares is important to buy or sell your shares as you no longer can seel your physical shares.
A share transfer deed is duly stamped and delivered to the company by the transferor along with share certificates to be transferred. The transferor also has to file form SH-4 along with his share certificates.
Companies also send a notice to the transferor intimating him about the documents received for the transfer of shares. If the transferor has made the application alone and paid for the shares as well, then the company acknowledges the transferee before registering the transfer. Once the transferee agrees within two weeks about the transfer of shares, then the company is not required to intimate the transferer about the transfer process.
When all the documents are received, they are evaluated within the next 3-5 days. If the documents are not complete or faulty, then they are returned to the concerned member. If there’s a botch from the transferor end like a change in signatures, then the documents are returned to the transferor otherwise to the transferee.
After examining all the documents, they are now sent to the Board of Directors for their approval. Once their approval is received then, only the transferee can be registered as the owner of those shares. The transferee needs to sign a share transfer form which will act as legal evidence that he’s the new owner of the concerned shares. The transferee name is thus registered as a member of the company. He receives a share certificate within a month from the receipt issued by the company initiating the transfer.
The share certificate received will now act as sole evidence that the concerned person is the legal owner of the shares.