Transmission of Shares in Listed Company

Transfer and transmission are two common terminology often used in corporates. Transfer by its simple name can be easily understood and frequently practiced among shareholders. However, transmission is generally lesser known concept when compared to the transfer.

Transmission occurs when the actual shareholder is no more, and the legal representative of the shareholder transmits the securities in its name. This is known as Transmission.

For example: Mr. A holds 100 shares in ABC limited. After demise of Mr. A, his son Mr. X applies to Company to transmit the 100 shares held in his father’s name to his name.

Key Points for transmission

  • While transfer of shares relates to a voluntary act of the shareholder, transmission is brought about by operation of law
  • The word ‘transmission’ means devolution of title to shares otherwise than by transfer, for example, devolution by death, succession, inheritance, bankruptcy, etc.
  • On registration of the transmission of shares, the person entitled to transmission of shares becomes the shareholder of the company and is entitled to all rights and subject to all liabilities as such shareholder.

In listed entities process of transmission is governed by its Article of Association, Companies Act, 2013 and SEBI(LODR) Regulations 2015.

Provisions in Companies Act,2013

Section 56 of Companies Act, 2013 specifies for transmission of securities. Subsection 2 of 56 states that Company has the power to register, on receipt of an intimation of transmission of any right to securities by operation of law from any person to whom such right has been transmitted.

Section 56(4)(c) states that every company shall, unless prohibited by any provision of law or any order of Court, Tribunal or other authority, deliver the certificates of all securities transmitted within a period of one month from the date of the intimation of transmission.

Provisions in SEBI(LODR) Regulations 2015

Regulation 40 of LODR regulations deals with Transfer or transmission or transposition of securities. Relevant aspect related to transmission is as below:

  • Request of Transmission can be processed even if securities are in physical form.
  • Board of listed company can delegate the power of transmission to committee, compliance officer, or to RTA
  • Listed entity shall ensure that transmission requests are processed for securities held in dematerialized mode and physical mode within seven days and twenty-one days respectively, after receipt of the specified documents.
  • The listed entity shall not register transmission when any statutory prohibition or any attachment or prohibitory order of a competent authority restrains it from transferring the securities from the name of the transferor

Documents required for transmission

SEBI/HO/MIRSD3/CIR/P/2016/0000000085 circular dated September 15, 2016 has instructed all stock exchanges, RTA and Depositories on Standardization and Simplification of Procedures for Transmission of Securities to make the process of transmission of securities more efficient and investor friendly. In this circular SEBI has specified the requirement of documents to process transmission in physical mode.

Documentary requirement for securities held in physical mode

1. For securities held in single name with a nominee:

i. Duly signed transmission request form by the nominee.
ii. Original or Copy of death certificate duly attested by a Notary Public or by a Gazetted Officer.
iii. Self-attested copy of PAN card of the nominee. (Copy of PAN card may be substituted with ID proof in case of residents of Sikkim after collecting address proof)

2. For securities held in single name without a nominee, the following additional documents may be sought

a) Affidavit from all the legal heirs made on appropriate non judicial stamp paper – to the effect of identification and claim of legal ownership to the securities.

Provided that in case the legal heir(s)/claimant(s) is named in the succession certificate or probate of will or will or letter of administration, an affidavit from such legal heir/claimant(s) alone would be sufficient.

b) For value of securities upto Rs. 2,00,000 per issuer company as on date of application, one or more of the following documents:

i. Succession certificate or probate of will or will or letter of administration or court decree, as may be applicable in terms of Indian Succession Act, 1925.
ii. In the absence of the documents as mentioned at (i) above,

a. A No objection certificate [NOC] from all legal heir(s) executed by all the legal heirs of the deceased holder not objecting to such transmission (or) copy of Family Settlement Deed duly notarized.
and

b. An Indemnity bond made on appropriate non judicial stamp paper – indemnifying the STA/Issuer Company

c) For value of securities more than Rs. 2,00,000 per issuer company as on the date of application:
Succession certificate or probate of will or will or letter of administration or court decree, as may be applicable in terms of Indian Succession Act, 1925.

Documentary requirement for securities held in  DEMAT Mode as per NSDL

1. For securities held jointly

In case the deceased was one of the joint holders, then the surviving holders have to request the DP vide a form called the transmission form along with a copy of notarised death certificate to transmit the securities lying in the account of the deceased to the account of the surviving holders.

For this purpose, the surviving clients must have a depository account, which can be with the same DP or with a different DP.

2. For securities held singly

In case of death of the sole holder, the legal heir(s) or legal representative(s) of the deceased must request the DP to transmit the balances lying in the Client account of the deceased to the account of the legal heir(s) or legal representative(s).

For this, the legal heir (s) or the legal representative(s) of such securities must submit an instruction called the transmission form to the DP along with the following documents:

  1. A copy of the death certificate duly notarised
  2. A copy of the Succession certificate duly notarised or an order of a court of competent jurisdiction where the deceased has not left a Will; or
  3. A copy of the Probate or Letter of Administration duly notarised.

However, if the legal heir(s) or the legal representative(s) express inability to produce either of the documents mentioned, and the market value of the securities held in each account of the deceased as on the date of application for transmission does not exceed Rs. one lakh, then the DP will process the transmission request on the basis of the following documents:

  1. Transmission form;
  2. Copy of the death certificate duly notarised;
  3. Letter of Indemnity duly supported by a guarantee of an independent Surety acceptable to the DP, made on appropriate non judicial stamp paper;
  4. An Affidavit made on appropriate non judicial stamp paper; and
  5. No Objection Certificate(s) from all the legal heir(s) who do not object to such transmission.

The DP will ensure that the documents submitted by the legal heir(s) or the legal representative(s) are in order and will then effect a transfer of the balances to the Client account of the legal heir(s) or the legal representative(s).

After effecting the transmission, the DP will close the account of the deceased.

3. For securities held with nominee

Upon the death of the sole client (in case of securities held singly) or the death of all the clients (in case of securities held jointly), the nominee must request the DP in writing along with :

  1. a certified true copy of the death certificate and
  2. transmission form to transmit the securities covered by the nomination to the account of the Nominee.

The DP will ensure the completeness of the form and validity of the signature of the client and then execute the transmission request.

Thus transmission of securities where nomination has been made eliminates the need of cumbersome legal documents such as will, succession certificate etc.

Source: NSDL/SEBI(LODR) Regulations/SEBI Circular

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