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Are you worried about legal formalities in the transmission of shares and confused about compliance needs? Let our ROS experts at Enterslice manage everything for you.
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Benefits of transmission of shares include the following:
Challenges faced in the transmission of shares include the following:
The following are eligible for the transmission of shares:
Various documents are required for SEBI Transmission of Shares, some of which include the following:
As your recovery consultant, Enterslice can help you with the following:
Smooth transmission of shares guaranteed with 100% legal compliance & seamless ownership transfer!
SEBI transmission of shares is the transfer of shares to the legal heir or nominee without any consideration in case of the original shareholder's demise.
The Securities and Exchange Board of India (SEBI) outlines the process for seamless transmission of shares to ensure a simplified process for investors. However, legal heirs must submit the required documents to the company's registrar or depository participant, such as a death certificate, succession certificate, or probate of the will.
If the securities value is up to ₹5 lakhs, SEBI permits the transmission of shares with minimal documentation. This process streamlines the ownership of share transfers, safeguarding investor rights while maintaining market transparency and efficiency.
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The transfer and transmission of shares is a legal process that involves adherence to the procedures. However, the process involves documentation challenges, which causes process delays, conflicts, and compliance issues for shareholders. Let us explore the challenges below:
If important documents, such as the death certificate, succession certificate, or probate, are missing, the process is delayed. Documents are required for legal verification, and additional paperwork may be required to process the transmission of shares requests.
Incorrect stamp duty payments or tax liabilities on share transfers cause monetary obligations, mandating compliance with SEBI regulations and state laws to avoid penalties or rejections.
Suppose the transfer of shares and transmission of shares are entangled in court battles over ownership conflicts by legal heirs or nominees. In that case, the process may get delayed until a clear legal verdict is obtained.
Every company has particular conditions for the transmission of shares. However, failure to meet the specific guidelines results in the rejection of claims, which demands modifications and submissions.
If registrars or depository participants take time to clear the verification processes, it increases the wait time, affecting beneficiaries in accessing their share and dividend entitlements.
The procedure for the transfer and transmission of shares facilitates the legal transfer of ownership through proper documentation. The process does not require stamp duty compliance. However, it mandates company approval to safeguard the rights of the shareholders in adherence to the regulations of the Companies Act, 2013. Process for transfer of shares and transmission of shares includes:
To initiate the process for transmission of shares, claimants must fill out and sign Form SH-4. It requires the transferor and transferee to execute and sign a transfer deed. However, when shares are transferred by government entities, financial institutions, or as security deposits, Form SH-4 may not be required. However, for debentures, Form SH-4 can be substituted with a standard instrument of transfer.
Once the transfer deed is executed, the next step in the process is to register it with the company in line with the Articles of Association (for shares) and trust deed (for debentures) that must necessarily permit the transfer. It is also important to furnish a share certificate or allotment letter for verification. In case the shares transferred are partly paid, the company must notify the transferee of pending dues (if any), which, in turn, requires NOC confirmation from the transferee within two weeks before proceeding with the registration.
According to the Indian Stamp Act, paying the stamp duty is mandatory before submitting the transfer deed. While the applicable stamp duty rate comprises 25 paise per ₹100 of the share value, it is essential to confirm that the affixed stamp on the transfer deed is cancelled at the time of or before signing to ensure the legality of the transaction. However, stamp duty rates and applicability depend on the regulations and rules of the particular states.
Once the verification is conducted successfully, the company registers the transfer of shares and transmission of shares and updates its records accordingly. Companies listed on a recognized stock exchange are not eligible to charge fees on share transfers. However, for partly paid shares, the company holds the registration process until the transferee offers an NOC (no-objection certificate) within two weeks of obtaining Form SH-5 from the company.
The SEBI transmission of shares is a stepwise process that follows a structured timeline. However, it is essential to ensure that legal heirs or nominees obtain their rightful ownership through a streamlined process within the stipulated timeline.
Beneficiaries such as legal heirs or nominees are mandated to fill out the transmission request form and submit it along with the necessary documents, including the death certificate of the original shareholder and succession certificate. These details must be submitted to the company's registrar or depository participant and take 7 to 10 working days to complete.
Once the transmission request is submitted, the company reviews the form and the submitted document to validate its authenticity and adhere to SEBI regulations to initiate the transmission process.
Once the documents are verified, the registrar/depository participant takes the transmission of shares request forward and updates the records to reflect the new shareholder details. The process takes 7 to 14 working days.
Once the above steps are complete, a new share certificate is issued in the name of the beneficiaries - legal heirs or nominees. This step takes 7 to 10 working days to complete.
The beneficiaries, including legal heirs and nominees, obtain official confirmation and acquire complete ownership rights, including dividend entitlements and shareholder privileges.
Various documents are required for the SEBI transmission of shares. However, the documents required are based on whether or not the shareholder is deceased or whether the shares need to be transferred for other reasons. The list of documents includes the following:
Signed transmission request form by legal heir or nominee
Certified copy of the death certificate of the deceased shareholder
Succession Certificate/Probate of Will/Letter of Administration to confirm legal rights
Original physical share certificates for verification
Duly notarized indemnity bond
Notarized affidavit by legal heir or nominee
KYC documents - PAN & Aadhaar card, passport of legal heir/nominee
No Objection Certificate (NOC) – From other legal heirs
Cancelled cheque or bank statement
SEBI transmission of shares is the process of transmitting shares to the legal heirs, nominees or joint holders owing to the death or incapacity of a shareholder. The following are eligible for the transmission of shares:
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The transmission of shares is a process of transferring share ownership to legal heirs, nominees, or joint holders hassle-free and without stamp duty. It streamlines succession, safeguarding the rights of shareholders and maintaining adherence to legal regulations. Benefits include the following:
One of the most significant benefits of the transmission of shares is the hassle-free and seamless transfer of shares to eligible people, including legal heirs or nominees, without the need for sale or a standard transfer process.
While share transfers require stamp duty, SEBI transmission of shares does not mandate the need for stamp duty, which, in turn, relieves the financial burden on beneficiaries.
Transmission of shares protects the rights of legal heirs and nominees appointed by the shareholders, facilitating conflict-free rightful ownership.
As per SEBI transmission of shares aligns with its regulations as well as the provisions of the Companies Act, facilitating a legally valid and transparent transmission procedure.
Beneficiaries of the transfer and transmission of shares enjoy continued dividends and bonuses related to the shares without any disruptions.
The process of transfer of shares and transmission of shares prevents fraud and unauthorized claims, facilitating rightful succession and maintaining shareholder value and investment security.
SEBI transmission of shares streamlines the inheritance process by eliminating the intricacies of share sales.
Requests for transfer of shares and transmission of shares are processed promptly. Companies usually process these requests within 30 days, facilitating fast ownership transfer to the rightful claimants.
Have a look at the prerequisites for transmission of shares-
Transmission of shares is essential to ensure seamless ownership transfer once the shareholders pass away. This process facilitates legal heirs or nominees to claim the shares that are rightfully theirs without legal conflicts. The process of transmission of shares aligns with SEBI regulations, averting delays or monetary losses. Transfer and transmission of shares offer beneficiaries access to dividends, voting rights, and corporate benefits. This process helps avoid hurdles emerging from unclaimed shares and inactive accounts.
If shares are not transmitted on time, they may be locked, impacting liquidity and asset management. Compliance with the transfer of shares and transmission of shares aligns with compliance requirements, enabling legal heirs to safeguard their inheritance. It also helps them maintain their shareholding rights uninterrupted, assuring financial soundness and safety.
Have a look at the services for transmission of shares offered by Enterslice-
Enterslice has over 10 years of experience in managing the transmission of shares. Our dedicated team is professional in its approach and committed to ensuring seamless transmission of shares. We help expedite the verification process to facilitate on-time transmission. We have the expertise in dealing with complex cases and offer legal support in all such matters.
Let us explore the reasons why we are the most trustworthy consulting firm for Transmission of Shares services:
Transmission of shares refers to the process of transferring share ownership owing to the death, insolvency, or lunacy of a shareholder. The process involves the transmissions of shares to the beneficiaries of the shareholders, including legal heirs or nominees in line with the compliance requirements of SEBI and Companies Act. The whole process follows a legal approach.
A transmission form is a formal document submitted by the beneficiaries of the shareholders, including legal heirs or nominees. The aim of the transmission form is to formally request the share transmission. This form outlines the details of the deceased shareholder and successor, as well as required documents, including a death certificate, succession certificate, or probate to legally transfer shares.
The Companies Act 2016 is the outcome of the bill that amended the Companies Act, 2013 in terms of structuring, disclosure and compliance requirements for companies. According to the Companies Act 2016, the transmission of shares materialises automatically upon the shareholder’s death or insolvency. However, the legal heir or nominees are mandated to submit the required documents to the company or depository to initiate the ownership transfer without executing a transfer deed.
The turnaround time (TAT) to process death claims depend from one company to the other. However, once the beneficiaries of the original shareholders submit all the necessary documents, including the death certificate, succession proof, and indemnity bond, the process is initiated, which then takes 30 to 60 days to complete.
While transfer and transmission of shares appear to be the same, but there is a clear difference between the two. While transmission of shares is initiated owing to the death, insolvency, or lunacy of the original shareholders, it requires legal documentation but no consideration. However, on the other side, transfer of shares is a voluntary activity between two parties involving consideration and execution of a transfer deed.
Companies are mandated to complete the process of transmission of shares within the stipulated time period. However, if any company fails to process the share transmission request within the prescribed period, it is liable to face penalties under the Companies Act. These penalties include fines on the company and concerned officers, ranging from ₹10,000 to ₹50,000 or more.
In case a Demat account holder dies without naming a nominee, legal heirs are eligible to submit a succession certificate, will, or probate to claim the securities. However, the beneficiaries must adhere to the compliance requirements, and the procedure to initiate the process must be followed. After the depository or the company validates the documents, share transfer to the rightful heirs is processed.
One significant case law for transmission of shares is that of Sulochana Nathany v. S.K. Roy (2004), wherein the court ruled that companies should oblige the share transfer to the legal heirs once they furnish valid proof of their identity. This case facilitated the protection of investor rights.
Understanding different types of shares is important for investors, wherein each category of shares offers unique rights, benefits, and financial advantages to the investors. The four main types of shares include the following:
As transmission of shares is an involuntary transfer of shares initiated upon the death or insolvency of the shareholders to the beneficiaries such as legal heirs and nominees, it does not incur any stamp duty. However, unlike transmission, the voluntary share transfer attracts stamp duty.
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