TRANSMISSION OF PHYSICAL SHARES
(31st January 2024)
A. Short
Summary:
The word “transmission” means
devolution of title to Shares otherwise than by transfer.
The transmission of shares is an often
encountered subject when dealing with share certificates, however it is not
widely recognised. The Companies Act distinguishes between the act of
transmission shares and the act of transfer shares. Transmission occurs through
legal procedures, as opposed to share transfers, which are based on the
voluntary decision of the shareholder. "Transmission" denotes the
transfer of ownership of shares through means other than physical transfer,
such as in cases of marital breakdown, death, succession, inheritance,
bankruptcy, or several other legal procedures.
When shares are transmitted, the
new owner becomes the registered shareholder with full rights and
responsibilities associated with the ownership of those shares.
This process is typically
governed by company laws, regulations, and the specific terms outlined in the
company's articles of association or shareholder agreements.
The process of transmission in
case of holding of shares in Physical or in Demat form are different. In this
editorial the process of transmission of physical share certificate shall be
discussed.
“Transmission” means passing of
property in Shares, other than by way of transfer, by operation of law
consequent to the death or insolvency of the member.
B.
Provisions of Transmission of Shares:
· Section 56, 58, 88 of Companies
Act, 2013
· Rule 11, 19 of Companies (Share
Capital and Debentures) Rules, 2014
· Rule 5 of Companies (Management
and Administration) Rules, 2014
· Table F of Schedule- I of the
Companies Act, 2013
· Reference – Secretarial Standard
6 of ICSI (It may be use for reference purpose)
C.
Important Note
i.
There is no need to prepare a transfer deed for
transmission of shares.
ii.
There is no stamp duty applicable on transmission of
shares.
iii.
There is no consideration involved in transmission of
shares.
D.
Process of Transmission of Shares:
I. In case of Nominee:
“Nominee” means an individual
named in accordance with the Act by a shareholder(s) whose Shares should vest
in such an individual on the death of the shareholder(s) and that individual
need not be a legal heir.
In case the deceased shareholder
has nominated any person as their nominee. the Shares shall vest in the Nominee
on the death of the Member. on death of the shareholder, the Nominee has the
option to elect either to register himself as the holder of the Shares of the
deceased or transfer the Shares to any other person. The transferees need not
be the legal heirs of the deceased shareholder(s).
The nominee shall submit the
following documents with the Company:
i.
A request letter from nominee
ii.
KYC Documents of Nominee
iii.
Copy of Death Certificate
iv.
Copy of Original Share Certificate
v.
Execution of Indemnity cum affidavit
Work by Company:
The Company shall check the name
of nominees from their records. If information matched with the record of the
Company. The Company shall do the followings in 30 days of receipt of request:
i.
Hold a Board Meeting for passing of resolution for
Transmission.
ii.
Register the name of the nominee as shareholder in
the register of members.
iii.
Endorsement on the Share certificate.
iv.
Deliver the Share certificate to the nominee.
v.
Type of Entries:
· The company is required to make
necessary entries in the Register of Members (Form MGT-1) for the transmission
of securities.
· Alternatively, if applicable,
entries can also be made in the Register of Debenture Holders or other
securities holders (Form MGT-2).
vi.
Timeline for Entries:
· The entries should be made
within 7 days of the Board Meeting in which the transmission of securities was
approved.
vii.
Approval Process:
· The approval for the
transmission of securities appears to be a decision made during a Board
Meeting.
NOTE:
· Original Share Certificates:
If the claimant for the
transmission of shares of a deceased shareholder is unable to produce the
original share certificates, the company should issue duplicate share
certificates after following a specific procedure.
· Entitlements of Legal
Representative or Nominee:
The legal representative or
nominee of the deceased member is entitled to receive the same dividends and
other advantages that the deceased shareholder would have received if they were
the registered holder of the shares.
· Limitations on Voting and Other
Rights:
However, the legal
representative or nominee is not entitled to exercise voting rights or other
rights in a general meeting unless they are registered as a member in respect
of the shares.
·
Liability on shares shall continue: In the case of a transmission
of shares, shares continue to be subject to the original liabilities, and if
there was any lien on the shares for any sums due, the lien would subsist,
notwithstanding the devaluation of the shares.
II.
In case of Joint Holder:
As per Table F of Schedule I, provides
that on the death of a member where he was joint shareholder, the survivor(s)
shall be the only person recognized by the Company. The legal heirs of deceased
members are abstained from getting registered as joint holder along with
surviving holder.
III.
In case of held in single name (No Nominee or Joint
shareholder):
|
Sr.
No.
|
Documents required for transmission
|
Sole
holder deceased & nomination registered
|
Sole
holder deceased & nomination not registered
|
|
1.
|
Transmission Request Form
|
Annexure C
|
Annexure C
|
|
2.
|
Original
death certificate or Copy of death certificate attested by a notary
public/gazette officer or copy of the death
certificate attested by the nominee(s)/claimant(s)/legal heir(s), subject to verification with original by the
RTA/Listed Issuer
|
✓
|
✓
|
|
3.
|
Self-attested
copy of Permanent Account Number Card
of the nominee(s)/claimant(s)/legal heir(s)
issued by the Income Tax Department
|
✓
|
✓
|
|
4.
|
Copy of Birth Certificate (in case the
nominee/claimant/legal heir is a minor)
|
✓
|
✓
|
|
5.
|
KYC* of the Claimant
Guardian (in case of nominee /claimant being a minor / of
unsound mind).
|
✓
|
✓
|
|
6.
|
Original security certificate(s)
|
✓
|
✓
|
*If not KYC compliant
|
7.
|
Notarized affidavit from all legal heir(s)
made on non-judicial stamp paper of appropriate
value on identity and claim of ownership, as per the format provided
in
Annexure D.
|
NA
|
✓
|
|
8.
|
In case the legal heir(s)/claimant(s) are named in the Succession Certificate or Probate
of Will or Will or Letter of Administration or Legal Heirship Certificate(or its equivalent certificate), instead of the document mentioned in point
7 above, an Affidavit from
such legal heir(s)/claimant(s), duly Notarised and
as per the format provided in Annexure
D, shall be sufficient.
|
NA
|
✓
|
|
9.
|
Copy of any of the
following documents:
(a) Succession certificate; or
(b) Probate of Will; or
(c) Will, along
with a notarized indemnity bond from
the legal heir(s)/claimant(s) to whom
the securities are transmitted, as per the format
specified provided in Annexure E;
or
(d) Letter of Administration; or
(e) Court Decree;
or
(f) Legal Heirship Certificate or its equivalent, along
with (i) a notarized indemnity bond from the legal heir
(s)/claimant(s) to whom the securities are transmitted, as per the format
specified provided in Annexure
E; and
(ii) No Objection from all the non-claimants, duly attested by a notary
public or by a gazetted officer as per the format provided in Annexure F.
The document should be Attested by the legal
heir(s)/claimant(s) subject to verification with the original or duly attested by a notary public or by a Gazetted officer
|
NA
|
✓
|