Depository System
The Depository System is an improvement over the age-old scrip based share trading system, where shares were held in the form of physical share certificates.
Under the Depository System, shares are kept in the form of electronic entries in the records of Depository. The share-related transactions are also done electronically. The actual shareholders enjoy all their rights, viz., dividend, voting rights etc
Benefits Of Depository System
- Elimination of loss, theft or fraud of share certificates
- Elimination of bad deliveries
- Elimination of delays and problems of paper-based system
- Faster transaction-processing due to electronic system
- Internet based trading becomes possible
- A single demat account can be utilized for shares of many companies
- No stamp duty to be paid on the shares
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GAIL has entered into an agreement with both National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) for dematerialisation of its shares.
Shares of the Company are compulsorily traded in dematerialized form w.e.f. 15.02.1999.
The intermediaries of the Depository System are:
- Depository
- Depository Participant
- Beneficial Owner
- Dematerialisation
- Rematerialisation
Depository: Depository means a company formed and registered under the Companies Act, 1956 which has been issued a certificate by SEBI to act as a Depository. Presently, there are two such Depositories, viz., National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL)
A Depository can be compared to a bank. It holds the investors' securities in electronic form, and also provides services related to transaction in securities.
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Depository Participant (DP): A DP is a link between the investor and the depository. It maintains the accounts of shareholders in electronic form and it can be a participant in either NSDL or CDSL or both. A DP is provided with a unique registration number called the DP ID.
Beneficial Owner: A Beneficial Owner is the true owner of the securities which are held in demat form with the Depository.
The Beneficial Owner enjoys all the rights of ownership such as dividend, voting rights etc.; however the Depository (such as NSDL or CDSL) is the registered owner of the securities.
At the time of opening an account with the DP, the Beneficial Owners are given an account number called the Client ID number. Shareholders must quote their DP ID-Client ID in all correspondence with the Company / R&TA.
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Dematerialisation
Dematerialisation refers to the process of converting physically held shares into demat form
Process of Dematerialisation
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The shareholder has to open an account with a DP.
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The shareholder has to submit a request to the DP for dematerialisation in the prescribed form along with the relevant share certificates. The form has to be submitted in triplicate.
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The DP forwards the request to the company (or its R&TA) who will verify the particulars of the request.
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If the relevant details are found to be correct, the above request is then forwarded to the company's R&TA electronically.
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After the confirmation of request by the Company's R&TA, the request for dematerialisation is processed, and the shareholder's account with the DP is credited with the number of his shares
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Rematerialisation
Rematerialisation is the process of conversion of electronically held shares into physical form.
For Rematerialisation, a shareholder has to submit a request to his DP. The DP blocks the client's account, and forwards the request to the R&TA, who in turn forward the request to the Depository. After the request is accepted by the Depository (NSDL/CDSL), the R&TA rematerialises the Share Certificates.
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