The Securities and Exchange Board of India (SEBI) has proposed a mandatory issuance of securities in dematerialised (demat) form for cases involving stock splits, sub-division, and consolidation. This move aims to encourage dematerialisation and further streamline securities management.
Key Proposal Highlights
- To enforce this requirement, SEBI suggests amending the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
- For investors lacking a demat account, the issuer company would need to open a demat account (suspense escrow account) with a ledger of ownership to manage such securities.
- Public feedback on the proposal has been sought through a consultation paper issued on Tuesday.
Current Scenario
Presently, regulations do not mandate the issuance of securities in demat form for stock splits, consolidation, or mergers/demergers. Many investors continue to hold securities in physical form, though such securities must be dematerialised to be sold or transferred.
Benefits of Dematerialisation
SEBI highlights several advantages of dematerialisation, including: 
- Reduced risk of fraud and forgery.
- Prevention of loss or damage to physical securities.
- Faster and more efficient transfers.
- Enhanced transparency and regulatory oversight.
- Reduction in legal disputes and administrative costs for both investors and companies.
Driving Towards Full Dematerialisation
The consultation paper emphasized the need to curtail the creation of new physical securities:
“To progress towards complete dematerialisation and prevent the generation of new physical securities by listed entities, it is imperative to mandate the conversion of existing physical certificates into demat form while prohibiting new issuances in physical format,” the paper stated.
SEBI’s move reflects a significant step toward modernizing securities handling, which aims to increase efficiency, security, and transparency in the capital markets.
