Relief As Physical Shares Folios Not To Be Frozen For Lack Of Specific Details

Investors who hold shares in physical form had the possibility of their folios being frozen if they had not updated several details like permanent account number, contact details and made a nomination in the shares.

The market regulator has now removed this condition, which will be a big relief for physical shareholders. This has big implications for investors, especially senior citizens, and it ensures that they can complete the details in the coming time period and not worry about the freezing of their investments.

There are many investors who hold shares in physical form. Most of these shares are old shares because in recent times, companies have been issuing shares only in demat form. One of the problems with the old physical shares is that there is less information available about the investors with the registrars.

When shares are held in the demat form, then the basic details like PAN, email id and mobile number are already present in the demat account, and these are used by the companies and their registrars to deal with the investors. This is not the case when there is a physical share certificate held by the investor and here, for each company and for each folio, the various details have to be kept updated by the investor.

The Securities and Exchange Board of India had issued a circular, which required the investors to update some specific details when they held shares in the physical form. These details include the PAN of all the investors, nomination for the folio where the investor holds the shares, contact details of the investor in the form of mobile number and email id, bank account details of the investor and the specimen signature of all the investors. The deadline for this was initially March 31, 2023, but has been extended after the initial announcement. 

The key part of the entire process in updation of the details for the physical shares was the penalty in case the process was not undertaken by the specific date. The original circular said that the folios where the details were not updated should be frozen.

The freeze of the folios would mean that the investor would not be able to deal or resolve any of their complaints with respect to the folios and the amount of dividend in the folios would also not be paid out. This would be overturned only when the required details were submitted to the registrars or the company.

Now, in a major change, the market regulator has removed the requirement of freezing of the folios and this is a big relief for the investor.

The impact of not freezing the folios will be very significant because there are numerous cases where the investors have not been able to update the details.

There are multiple reasons why this is the case. One is that it is difficult for many investors to actually give the details because these relate to shares that are lying somewhere with the investor, but they might not have any track of it.

In many cases, the details required cannot be given due to the fact that one of the joint holders might not be alive. This requires going through the entire process of transmission, which can take months to complete. There is also the fact that address of many investors has changed so while the investor has the physical shares, they might not be getting the communication from the companies.

Another situation, which is more likely with physical shareholders, is that they might be unaware of the new requirements. The investors with physical certificates often just put them away and they do not bother with the details related to it because they do not feel the need for any action.

In order to solve the issue, there is a need for the investor to ensure that they update the required details. The no-freezing directive is a good thing for the investor as they will not suffer negative consequences immediately. However, there is a need to ensure that the details are updated as soon as possible because this is for the benefit of the investors as they will receive the relevant communications easily and be able to manage the situation better.

The writer is the founder of Moneyeduschool.