Transmission of shares (or transfer of shares after the death of a shareholder) in case of dematerialised shares will now call for the same procedure as transmission of shares in physical form.
The capital market regulator, Securities and Exchange Board of India (SEBI) said in a circular dated January 4, 2019, that it wanted to harmonise the procedures for transmission of securities in the dematerialised mode with that of transmission of securities in physical mode. The latter’s guidelines are listed in SEBI Listing Obligations and Disclosure Requirements (Sixth Amendment) Regulations, 2018.
As investors get ready to switch fully in dematerialised mode come April 1, 2019, let’s take a look at what this means.
Up till now, how an investor’s equity shares got bequeathed after the death to their heir, depended on whether he/she left behind physical or dematerialised shares. While the former used to be governed by SEBI Listing Obligations and Disclosure Requirements (LODR), the latter used to be governed by Bye-laws and Business Rules of the respective depositories (National Securities Depository, or NSDL, and Central Depository Services (India) or CDSL).Under the said SEBI LODR, if an investor leaves behind physical shares held jointly, the shares would pass on to the surviving joint holder. But if the shares were held singly by the investor, then the procedure for transmission will depend on whether the investor has made a nomination or not, and whether there is a probate of will or succession certificate or letter of administration.
If there is a nominee to such shares, the nominee has to come forward and submit a transmission request form, attach a death certificate of the deceased holder attested by a notary.
In case the shareholder has made no nomination, then the procedure for transmission of shares set out under the SEBI LODR requires a duly stamped affidavit by all the legal heirs, or by the identified legal heir if there is a probate of will or succession certificate or letter of administration.
“A probate of will is a judicial process where the will is “proved” or certified by a competent court of law as the true last testament of the deceased.”, says Ashok Sathyanathan, Partner, SNG & Partners.
What if there is no nominee as well as no will and the shares were held singly? Under SEBI LODR, if the value of such shares per listed company does not exceed Rs 2 lakh, then a simple no-objection certificate is required from all legal heirs in favour of the claimant to such shares or alternatively a family settlement would also do, together with an indemnity bond.
If the value of such shares is more than Rs 2 lakh and there is no will or nominee, all legal heirs are required to come together to give a signed declaration affidavit and identify and register the rightful claimant to such shares.
The procedure for transmission of shares held in dematerialized form as set out in the business rules of respective depositories prescribe that where there is no nominee, then a probate of will or succession certificate or letter of administration is required.
If there is no nomination and in the absence of a probate of will or succession certificate or letter of administration and where the value of shares in the demat account does not exceed Rs 5 lakh, then a family settlement deed or a no objection certificate from all legal heirs in favour of the claimant together with a duly stamped affidavit is required to be furnished, in addition to an indemnity bond provider.
But if the value of the shares in the demat account exceeds Rs 5 lakh, the claimant is required to furnish probate of will or succession certificate or letter of administration. “Under the SEBI LODR, in the absence of nomination and probate of will or succession certificate or letter of administration, all legal heirs are required to provide a duly stamped affidavit to the effect of identification and claim of legal ownership of the shares.”, says Sathyanathan.
What should you do?
January 4 ruling brings the procedure for transmission of demateriased shares on par with physical shares. The good part here is that with the mandatory dematerialising of shares in case their shareholders wish to transfer them, effective April 1, the transmission of shares under demat mode needed to be strengthened.Not all are enthused. “Transmission of shares will now take months as the court process in obtaining probate of will or succession certificate takes about 6-15 months, if it is not contested. The shares, dividend and other benefits of a shareholders will remain in abeyance till the probate is obtained. This will be an incessant burden on the common man and the companies tend to benefit”, says Payal Parikh, managing partner, ANB Legal.
First Published on Jan 8, 2019 01:37 pm
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