Recovery of Shares

Common Scenarios Leading To Transmission of Shares and How to Handle Them

Articles (also known as Articles of Association) of the company usually provide the provisions for the Transmission of shares. But in a scenario where there is the absence of such AOA, the company can follow Regulations 23 to 27 of Table F to govern all the provisions related to the transmission of shares.

This article is an attempt to elaborate on the concept of shares, the transmission of shares along with the different scenarios that can lead to the transmission of share in India.

Meaning of Transmission

Transmission of shares is one of the less well-known but frequently encountered issues while dealing with share certificates. Transmission of shares is distinct from the transfer of shares according to the Companies Act. While transferring shares involves the shareholder’s voluntary action, transmission occurs as a result of the legislation. The term “transmission” refers to the passing of ownership of shares other than through a transfer, such as through death, succession, inheritance, bankruptcy, marriage, etc. While the delivery of a suitable instrument of transfer, such as a transfer deed that has been properly stamped and executed, is required for the transfer of shares, the transmission of shares is accomplished by sending the required paperwork to the firm, such as a notarized copy of the death certificate. The person entitled to the transmission of shares becomes a shareholder of the firm upon registration of the transmission and has all the rights and is responsible for all the obligations of such a shareholder.

If the dead shareholder had shares in many companies, the necessary paperwork must be provided to each of the firms, along with the share certificates, in order to complete the transfer of shares for those shares. As a result, the mail service is heavily relied upon. If the survivor(s) desires to take advantage of the benefits acquired through these shares, follow-up may need to be made with each of the corporations in order to get the transmission implemented before the book closure.

Transmission of Securities in the Depository System

All these issues are lessened under the depository system because shares are represented as account balances in electronic form. Not only is the transfer process through the depository straightforward, but it also moves forward more quickly. This is so because the heir to the title only communicates with his DP, a single entity.

• Transmission of Securities held jointly: The surviving holders must ask the DP via a form called the transmission form and a copy of the notarized death certificate for the transfer of the securities from the deceased’s account to the surviving holders’ account if the deceased was one of the joint holders. The surviving clients are required to have a depository account for this reason, which may be with the same DP or a separate DP.
• Transmission of Securities held singly: The legal heir(s) or legal representative(s) of the dead must ask the DP to transfer any remaining balances on the sole holder’s client account to the account of the heir(s) or representative(s) in the event of the sole holder’s death. In order to do this, the legal heir(s) or representative(s) of such securities must submit the transmission form to the DP together with the following necessary paperwork:
• 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.

Nevertheless, the DP will process the transmission request on the basis of the following documents if the legal heir(s) or the legal representative(s) express an inability to produce either of the documents listed under (b) and (c) above, and the market value of the securities held in each of the deceased’s accounts as of the date of application for transmission does not exceed INR one lakh:

1. Transmission form;
2. Copy of the death certificate duly notarised;
3. Letter of Indemnity duly supported by a guarantee of an independent Surety acceptable to the DP, made on appropriate non judicial stamp paper;
4. An Affidavit made on appropriate non judicial stamp paper; and
5. No Objection Certificate(s) from all the legal heir(s) who do not object to such transmission.

A transfer of the balances to the legal heir(s) or legal representative(s)’ client account will be made after the DP confirms that the documentation presented by the legal heir(s) or legal representative(s) are in order.

After effecting the transmission, the DP will close the account of the deceased.

• Transmission of Securities in case of Nomination: In case the shareholder has appointed a nominee, the shares will be transmitted in favour of the nominee on execution of an indemnity cum affidavit. The following documents are required:
  • A duly executed indemnity cum affidavit
  • A copy of death certificate of the deceased (Note: this has to be duly attested by competent authority (magistrate, notary public, Government of India or manager of any Scheduled Bank)
  • Original share certificate(s)
  • All the documents has to be sent to the bank or to the Registrar effecting transmission.

NOTE 1: In a case where there is a single shareholder, and no nominee has been appointed but a will is made, then shares will be transmitted favour of those  persons who are heir of the deceased registered shareholder as per probated will.

Note: 2: Another scenario where the deceased shareholder has died intestate and no nomination has been made, then in this case the transmission of share will be effected only on complying with required procedure.

Conclusion

In this article the author has talked about different scenarios that leads to transmission of shares in India. As per Section 56 of Companies Act of 2013, transmission is a result of the operation of law. The transmission of shares takes place on death or insolvency of a holder of securities or been deemed insane by a court of competent law.

Frequently asked questions (FAQs)

Read Our Article: Transmission of Shares under Companies Act, 2013