For years, thousands of investors have been locked out of their own holdings because their old paper share certificates could not be transferred or dematerialised. Many bought legitimate shares before 2019 but could not get them recorded in their names. Sellers died. Companies shut down. Paperwork went missing. Now SEBI wants to fix this old pain-point and clean up India’s last pockets of paper ownership. A new consultation paper issued October 17 ( by the stock market regulator proposes major steps. Together, they aim to move India closer to a fully-digital shareholding system while protecting genuine investors. Here is a lowdown.
One-time window
SEBI had stopped transfer of physical shares from April 1, 2019. Since then, any transfer can happen only if the securities are in demat form. The rule pushed companies and investors toward full digitisation. But it also trapped many buyers who had already executed transfer deeds before the 2019 deadline. Their papers were returned for small errors. Some were never re-lodged. Others got lost when sellers died or firms were liquidated. To ease this, SEBI opened a special re-lodgement window from July 7, 2025, to January 6, 2026, through a circular issued earlier this year. The consultation paper now proposes to formally write this relief into the SEBI (Listing Obligations and Disclosure Requirements) Regulations. Regulation 40(1) will get an exception clause, allowing SEBI to specify a limited period for such transfers, whenever needed.
Before introducing this relief, SEBI had set up a panel of experts. The group studied investor complaints after the 2021 deadline for re-lodgement had lapsed. It found that many genuine transfers were stuck because of missing documents or deceased sellers. The panel advised SEBI to give investors one final opportunity to re-lodge such cases. This recommendation led to the July 2025 circular and the current consultation paper unveiled in October 2025.
The window covers cases where the transfer deed was executed before April 1, 2019. Investors who missed previous deadlines can now re-lodge their documents with the company’s Registrar and Transfer Agent (RTA). Once verified, the shares will be credited only in demat form.
SEBI’s own data later confirmed the scale of the problem. In the first 45 days of the re-lodgement window, 66 per cent of investor requests handled by major RTAs were for fresh lodgement of old physical deeds. That means thousands of investors are still struggling to get rightful ownership recorded.
To prevent misuse, the paper lists strict due-diligence steps. RTAs must verify PAN, address and identity of both buyer and seller. If names differ across documents, investors must submit proof such as passport, marriage certificate, gazette notification or Aadhaar.
If the transferor’s signature is missing or cannot be verified, the transferee must file a notarised indemnity bond, provide address proof and agree not to transfer the shares for one year. Companies must also publish newspaper notices and post the details of such transfers on their websites and stock exchanges for transparency.
There are even rules for complex cases. If the transferee has died, legal heirs can request a combined transfer-cum-transmission. They must submit original share certificates, client master list of their demat account, proof of purchase and an indemnity bond. Transfers will be completed only after a public notice period of 30 days and will remain under one-year lock-in.
These safeguards show SEBI’s attempt to balance investor convenience with record integrity. The goal is not to reopen a floodgate for paper trading but to clear legacy backlogs under close supervision. The consultation paper also states that this relaxation will come with a sunset clause so that dematerialisation remains the long-term norm.
For retail investors and families who still find bundles of old certificates in cupboards or lockers, this may be the last chance to regularise ownership. Once this window closes, non-dematted paper shares could effectively turn illiquid.
Investors should check whether the original purchase was before April 2019, gather supporting documents and contact the relevant company’s RTA well before January 2026. Legal heirs should locate death certificates and succession proofs early because RTAs will not process disputed or incomplete claims.
Letter of confirmation
The second proposal in the consultation paper tackles a newer but widespread irritant in demat operations.
Under the current system, when an investor asks for a duplicate certificate, a name correction or transmission to legal heirs, the RTA issues a Letter of Confirmation (LOC) instead of a physical certificate. The investor must then take this LOC to their depository participant to get the shares credited in demat form. The LOC stays valid for 120 days. If it is not used in time, the shares go into a Suspense Escrow Demat Account (SEDA) of the company.
The arrangement was meant to avoid re-issuance of paper certificates. But in practice, it has become an administrative maze. Investors often forget to visit the depository in time. RTAs must send reminders at 45 and 90 days. Companies pay for maintaining the suspense accounts. Even when investors comply, the double process increases turnaround time and confusion.
SEBI now proposes to abolish the LOC step altogether. Instead, RTAs or listed companies will directly credit verified shares into the investor’s demat account after completing their due-diligence checks. Depositories will develop the technology and workflow for this. Investors will simply need to have a valid demat account and attach their Client Master List (CML) with the service request.
This change should make life easier for both investors and back-office teams. It cuts one layer of physical verification, eliminates duplicate effort and prevents shares from lying idle in suspense accounts. It also aligns with SEBI’s wider goal of “ease of doing business” in the securities market.
At the same time, RTAs will still need to ensure that every case is backed by proper identity and address proof. The proposal does not dilute verification standards. It only streamlines the flow of documents so that shares can move seamlessly into digital custody without additional visits or reminders.
Investor takeaways
The two proposals, taken together, mark another push in India’s long journey from paper to pixels. Most active investors already operate in a fully-demat world. But many older families still hold small legacy lots from company allotments or early IPOs of the 1980s and 1990s. These often sit unclaimed because the transfer process froze after 2019.
If the draft rules are finalised, such investors can finally regularise those holdings, get them into demat accounts and even sell them later. However, they must act within the prescribed period and maintain all supporting documents, including identity proofs and old purchase records. The annexure to SEBI’s paper also lays down detailed steps for verification, newspaper notice and indemnity bonds to make sure these transfers are genuine.
SEBI has invited public comments till November 7, 2025, through its website or by e-mail. The regulator will review responses before notifying final amendments.
Published on October 25, 2025
