Restriction on Transfer of Physical...
The physical shares can be understood as a corporeal share certificate. It is possessed by the...
There are instances where the deceased individual forgets to mention the name of his successor in the will. This lead to complexities when the legal heir of the deceased person tries to transfer the shares in their name. A transmission is a form of transfer whereby the transfer takes place through the operation of law. It can be by way of death, inheritance or succession.
Generally, the Article of Association of a company provides for the transmission of shares. Apart from the AOA, Section 56 and Table F (Regulation 23 to 27) of the companies act 1956 states the provision for the transmission of shares. According to the government’s regulation, the legal heirs are entitled to receive the shares held by the deceased member of the company, and the company is liable to transfer those shares in respect of the claimant. The legal heirs of the deceased are the owners of the shares and are liable to get all the advantages, including dividends attached to the shares. The complexities in claiming the shares arises when the deceased forgets to mention any nominee in their shares documents and the claimant has to obtain succession certificate for the transmission of shares.
A succession certificate is a form of authenticity given to the legal heir of the deceased who has not prepared a will. The certificate gives the legal heir or the holder of the certificate the right to claim the debts and securities owned by the deceased. The certificate holder shall make payment of all the debts of the deceased person and is entitled to any right attached to the shares.
A District Judge of relevant jurisdiction is authorised to provide a succession certificate. A petition along with relevant documents shall be filed with the District Judge of a relevant jurisdiction where the deceased person resides. In case it is difficult to ascertain the living place of the deceased, then the relevant jurisdiction shall be the place where the deceased person holds the property.
According to the Indian Succession Act 1956, a person dying without making a valid or enforceable will is called Intestate Succession. Personal laws of the deceased are applicable while distributing the properties of the Deceased. But the personal laws do not apply in the distribution of shares. There are necessary documents to be filed with the company or the depository participant to claim the shares of the deceased.
The documents that are required:
The general process involved in the process of transmission of shares where there is no succession certificate are:
The transmission of shares becomes challenging when the deceased shareholder forgets to prepare a will. The legal complexities arise in this case as it becomes hard for the legal heir to acquire an interest in the property of his relative. A succession certificate is needed in case the deceased has died intestate and where the devolution of the property becomes impossible due to a fault in the will. The devolution of property of the deceased, who has died intestate is defined according to the personal laws, but in the case of shares, no personal laws are involved. Shares are movable property and there is no connection of any personal laws or its devolution. The devolution of shares takes place with anyone who can prove their ownership to the company or the DP. There is no principle of “First Come, First Basis”. Anyone can claim the share of the deceased provided that a no objection certificate is received from the other claimants. In Mrs. Pushpa Vadera vs Thomas Cook (India) Ltd., 1996 87 CompCas 921 CLB, the court gives due regard to the articles of association of the company. The respondent company, in its AOA has specifically mentioned that the board has the discretionary power to dispense with the succession certificate in case of transmission of shares. The court relied on the AOA of the company and upheld the transmission in the name of the appellant along with the benefits that accrued during the period of litigation. The court also states that the non-requirement of probate of will applies to movable property.
Read Our Article: Legal Heir Certificate – A Brief Overview