Transfer Of Shares Upon Death of Shareholder
Alike physical properties, the ownership of equity shares are also transferred to the beneficiary heir on the death of shareholder and so the ownership of demat shares also. Securities and Exchange Board of India (SEBI) has brought a new amendment regarding the transfer of demat shares in case of shareholder’s death. This amendment makes the process for transfer of demat shares and the process for transfer of physical shares upon the death of a shareholder similar to each other.
SEBI’s Listing Obligations and Disclosure Requirements (LODR) regulate the transfer of physical shares, whereas the transfer of demat shares is regulated by two leading depositories which are National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).
However, now the guidelines of LODR (Sixth Amendment) Regulations, 2018 governs the dematerialisation of shares and securities. This is due to the circular issued by SEBI on 4th January, 2019 with the aim to tune the two procedures i.e. the procedure of transfer of shares and securities held in demat form and the procedure of transfer of shares & securities in physical form.
Circular issued by SEBI on 4th January, 2019 made the conversion of physical shares into Demat form mandatory post 1st April 2019 which means after 1st April 2019 no shares should be present in physical form, instead all of them should have electronic presence. This germinated a need for old investors who were still having physical shares to learn the Demat account opening process and open a Demat account.
It is very important to know how the shares are transferred upon the death of shareholder. Here, we have discussed the shares transfers under different conditions as per the rules & regulations of SEBI’s Listing Obligations and Disclosure Requirements (LODR) and National Securities Depository Limited (NSDL) & Central Depository Services Limited (CDSL). Here we go:
Transmission of Physical Shares upon death of shareholder
When Shares are held jointly
The surviving holder shall become the holder of securities if the joint holder of shares expires.
When the shares are held by single investor
In such cases, the shares will be transferred to the legal heirs after confirming if the investor has nominated someone or not. If the shareholder has not nominated anyone then the will, letter of administration or succession certificate will be taken into account.
When the shareholder has nominated someone
In such conditions, the nominee shall submit a request for the transfer of shares in the transmission request form along with the notary attested death certificate of the deceased shareholder.
Read Also:- All about Registrar and share transfer agents (RTA)s’ Role & Registration
When the shareholder has not nominated anyone
In such conditions, the will, letter of administration or succession certificate will be considered.
According to the LORD rules, the legal heirs or the identified legal heir mentioned in certified/valid will or succession certificate or letter of administration shall request for the transfer of shares by submitting the affidavit.
A certified or valid will is one which has undergone a judicial process when the will is “validated” or certified by an authorised court of law as the deceased’s real and last testament. This is also known as Probate of will.
When the single shareholder has neither nominated anyone nor prepared any will
When the current valuation of the company’s shares is Rs. 2 lakh or below
The claimant shall submit a no objection certificate from each of the legal heirs as well as the indemnity bond, as per the LODR regulations.
When the current valuation of the company’s shares is above Rs. 2 lakh
A signed declaration affidavit must be submitted by the legal heir to register and prove themselves as the rightful claimant of the shares.
Transmission of Demat Shares upon death of shareholder
Transmission of Demat Shares upon death of shareholder is governed by the business norms & regulations of concerned depositories which can be stated as follows:
When the shareholder has not nominated anyone
In such conditions, the probate of wills, letters of administration or succession certificate will be considered.
When the single shareholder has neither nominated anyone nor prepared any will
When the current valuation of the company’s shares is Rs. 5 lakh or below
The claimant shall submit a family settlement deed or no objection certificate from all the legal heirs, together certifying the claimant, along with the duly furnished & stamped affidavit and indemnity bond provider.
When the current valuation of the company’s shares is above Rs. 5 lakh
A probate of will or succession certificate or letter of administration has to be submitted by the claimant.
Conclusion
The alterations in the process of transferring shares upon the death of the shareholder have sprawn out the need for the old investors having shares in physical form to open a Demat account and learn the methods to open the same. In fact, all the individuals who are new in this market must have full-fledged knowledge about Demat accounts and methodologies related to it. They must be updated with the associated norms & notifications to avert issues at a later stage.
