InvestorQ : Are there are any limitations in holding physical shares?
Aditi Sharma made post

Are there are any limitations in holding physical shares?

Answer
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Rashi Mehra answered.
2 years ago


Before the concept of demat was first introduced by SEBI in 1997, shares were held in the form of share certificates. It was quite cumbersome. One had to safely keep the share certificates in custody and ensure that it does not get lost or mutilated. When the shares were purchased through a broker, the broker would give you the share certificates in the name of the seller with the transfer form attached to it. The buyer would have to send the certificates along with the transfer form to the company’s registrar to get new certificates printed with their names. The entire process would take more than a month and involved a lot of risks. Certificates could get lost in transit, they could get misplaced or they could get mutilated. Quite often, the transfer form got rejected because the signature in the transfer form did not match with the signature in the company’s records. It is to overcome all these problems that dematerialization was introduced in 1997.

This is the copy of RIL share certificates in the pre-demat era. Each investor had a folio number and each share certificate had a distinctive number series based on which it was identified. That is how complex it was and each transfer would entail sending the shares back and forth.