1. How to Transfer Shares in case of Death
Transmission
One of the lesser-known but widely experienced problems with respect to dealing in share certificates is transmission of shares. The Companies Act distinguishes transmission of shares from transfer of shares. While transfer of shares relates to a voluntary act of the shareholder, transmission is brought about by operation of law. The word 'transmission' means devolution of title to shares otherwise than by transfer, for example, devolution by death, succession, inheritance, bankruptcy, marriage, etc. While transfer of shares is brought about by delivery of a proper instrument of transfer (viz, transfer deed) duly stamped and executed, transmission of shares is done by forwarding the necessary documents (such as a notarised copy of death certificate) to the company. On registration of the transmission of shares, the person entitled to transmission of shares becomes the shareholder of the company and is entitled to all rights and subject to all liabilities as such shareholder.
In case the deceased shareholder had holdings in different companies, then in order to effect transmission of shares for these shares, the relevant documents must be sent to each of the companies, alongwith the share certificates. This results in a heavy reliance on the postal system. Follow-up may have to be made with each of the companies in order get the transmission effected before the book closure, if the survivor(s) wishes to avail of the benefits accrued through these shares.
Transmission of Securities in the Depository System
In the depository system, all these problems are mitigated as the shares are account balances in the electronic form. The process of transmission through the depository is not only simple but it is also quicker. This is because the successor to the title interacts only with one entity - his DP.
Transmission of Securities held jointly : In case the deceased was one of the joint holders, then the surviving holders have to request the DP vide a form called the transmission form along with a copy of notarised death certificate to transmit the securities lying in the account of the deceased to the account of the surviving holders. For this purpose, the surviving clients must have a depository account, which can be with the same DP or with a different DP.
Transmission of Securities held singly : In case of death of the sole holder, the legal heir(s) or legal representative(s) of the deceased must request the DP to transmit the balances lying in the Client account of the deceased to the account of the legal heir(s) or legal representative(s). For this, the legal heir (s) or the legal representative(s) of such securities must submit an instruction called the transmission form to the DP alongwith the following documents:
- A copy of the death certificate duly notarised
- A copy of the Succession certificate duly notarised or an order of a court of competent jurisdiction where the deceased has not left a Will; or
- A copy of the Probate or Letter of Administration duly notarised.
However, if the legal heir(s) or the legal representative(s) express inability to produce either of the documents mentioned under (b) and (c) above, and the market value of the securities held in each account of the deceased as on the date of application for transmission does not exceed Rs. one lakh, then the DP will process the transmission request on the basis of the following documents:
- Transmission form;
- Copy of the death certificate duly notarised;
- Letter of Indemnity duly supported by a guarantee of an independent Surety acceptable to the DP, made on appropriate non judicial stamp paper;
- An Affidavit made on appropriate non judicial stamp paper; and
- No Objection Certificate(s) from all the legal heir(s) who do not object to such transmission.
The DP will ensure that the documents submitted by the legal heir(s) or the legal representative(s) are in order and will then effect a transfer of the balances to the Client account of the legal heir(s) or the legal representative(s).
After effecting the transmission, the DP will close the account of the deceased.
Transmission of Securities in case of Nomination
The nomination facility for shares is provided by amendment in Companies Act 1956. The clients can avail of this facility by furnishing duly filled Form for Nomination available with their DPs. This form contains photograph of the nominee and the other details of the nominee, which help DPs to identify and give effect to the nomination given by the clients.
Upon the death of the sole client (in case of securities held singly) or the death of all the clients (in case of securities held jointly), the nominee must request the DP in writing along with a certified true copy of the death certificate and transmission form to transmit the securities covered by the nomination to the account of the Nominee. The DP will ensure the completeness of the form and validity of the signature of the client and then execute the transmission request. Thus transmission of securities where nomination has been made eliminates the need of cumbersome legal documents such as will, succession certificate etc.
Relevant Legal Provisions
- Bye-Law 9.10 : Transmission of Securities
- Bye-Law 9.11 : Transmission of Securities in the case of Nomination
- Business Rule 12.6 : Account Transfer in case of Transmission
2. How to convert your Physical Paper Shares to Demat
Dematerialisation is the process by which a client can get physical certificates converted into electronic balances.
An investor intending to dematerialise its securities needs to have an account with a DP. The client has to deface and surrender the certificates registered in its name to the DP. After intimating NSDL electronically, the DP sends the securities to the concerned Issuer/ R&T agent. NSDL in turn informs the Issuer/ R&T agent electronically, using NSDL Depository system, about the request for dematerialisation. If the Issuer/ R&T agent finds the certificates in order, it registers NSDL as the holder of the securities (the investor will be the beneficial owner) and communicates to NSDL the confirmation of request electronically. On receiving such confirmation, NSDL credits the securities in the depository account of the Investor with the DP.
Precautions
- Holdings in those securities that have not yet been admitted for dematerialisation by NSDL cannot be dematerialised. List of securities admitted for dematerialisation should be verified before defacing the securities.
- Holdings in street name cannot be dematerialised.
- The combination of names of holders as printed on the physical certificate should be identical with the names initiating the dematerialisation request.
- Separate dematerialisation requests will have to be filled for locked-in and free holdings.
- Separate dematerialisation requests will have to be filled for holdings locked-in for different reasons.
- Separate dematerialisation requests will have to be filled for fully paid up and partly paid-up holdings.
- Separate dematerialisation requests will have to be filled for holdings in the different ISINs of a company.
Procedure
- The client (registered owner) will submit a request to the DP in the Dematerialisation Request Form for dematerialisation, along with the certificates of securities to be dematerialised. Before submission, the client has to deface the certificates by writing "SURRENDERED FOR DEMATERIALISATION".
- The DP will verify that the form is duly filled in and the number of certificates, number of securities and the security type (equity, debenture etc.) are as given in the DRF. If the form and security count is in order, the DP will issue an acknowledgement slip duly signed and stamped, to the client.
- The DP will scrutinize the form and the certificates. This scrutiny involves the following
- Verification of Client's signature on the dematerialisation request with the specimen signature (the signature on the account opening form). If the signature differs, the DP should ensure the identity of the client.
- Compare the names on DRF and certificates with the client account.
- Paid up status
- ISIN (International Securities Identification Number)
- Lock - in status
- Distinctive numbers
- In case the securities are not in order they are returned to the client and acknowledgment is obtained. The DP will reject the request and return the DRF and certificates in case:
- A single DRF is used to dematerialise securities of more than one company.
- The certificates are mutilated, or they are defaced in such a way that the material information is not readable. It may advise the client to send the certificates to the Issuer/ R&T agent and get new securities issued in lieu thereof.
- Part of the certificates pertaining to a single DRF is partly paid-up; the DP will reject the request and return the DRF along with the certificates. The DP may advise the client to send separate requests for the fully paid-up and partly paid-up securities.
- Part of the certificates pertaining to a single DRF is locked-in, the DP will reject the request and return the DRF along with the certificates to the client. The DP may advise the client to send a separate request for the locked-in certificates. Also, certificates locked-in for different reasons should not be submitted together with a single DRF
- In case the securities are in order, the details of the request as mentioned in the form are entered in the DPM (software provided by NSDL to the DP) and a Dematerialisation Request Number (DRN) will be generated by the system.
- The DRN so generated is entered in the space provided for the purpose in the dematerialisation request form.
- A person other than the person who entered the data is expected to verify details recorded for the DRN. The request is then released by the DP which is forwarded electronically to DM (DM - Depository Module, NSDL's software system) by DPM.
- The DM forwards the request to the Issuer/ R&T agent electronically.
- The DP will fill the relevant portion viz., the authorisation portion of the demat request form.
- The DP will punch the certificates on the company name so that it does not destroy any material information on the certificate.
- The DP will then despatch the certificates along with the request form and a covering letter to the Issuer/ R&T agent.
- The Issuer/ R&T agent confirms acceptance of the request for dematerialisation in his system DPM (SHR) and the same will be forwarded to the DM, if the request is found in order.
- The DM will electronically authorise the creation of appropriate credit balances in the client's account.
- The DPM will credit the client's account automatically.
- The DP must inform the client of the changes in the client's account following the confirmation of the request.
- The issuer/ R&T may reject dematerialisation request in some cases. The issuer or its R&T Agent will send an objection memo to the DP, with or without DRF and security certificates depending upon the reason for rejection. The DP/Investor has to remove reasons for objection within 15 days of receiving the objection memo. If the DP fails to remove the objections within 15 days, the issuer or its R&T Agent may reject the request and return DRF and accompanying certificates to the DP. The DP, if the client so requires, may generate a new dematerialisation request and send the securities again to the issuer or its R&T Agent. No fresh request can be generated for the same securities until the issuer or its R&T Agent has rejected the earlier request and informed NSDL and the DP about it.
Processing of Demat Requests in Case of Account Holders Name not Matching excatly with Physical Certificate
Procedure for Transposition cum Demat
Procedure for Transmission (Name Deletion) and Dematerialisation to be done together
- Check the demat performance of the companies whose shares are to be given for dematerialisation.
Source:
Disclaimer: This article is for the purpose of information and shall not be treated as solicitation in any manner and for any other purpose whatsoever. It shall not be used as legal opinion and not to be used for rendering any professional advice. This article is written on the basis of author’s personal experience and provision applicable as on date of writing of this article. Adequate attention has been given to avoid any clerical/arithmetical error, however; if it still persists kindly intimate us to avoid such error for the benefits of others readers.
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