Procedure for Transmission of Securities

Khushboo Sharma

Khushboo Sharma

Published on: Sep 11, 2023

Darshi Dave

Updated on: Sep 14, 2023

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Introduction

The process of Transmission of Shares involves registering share in a company in the name of a deceased or insolvent person by operation of law. Transmission of shares is often misidentified as the Transfer of shares, whereas they are two separate terms which can be distinguished as follows:

Applicable Provisions:

1. Section 56, 58, 88 of Companies Act, 2013
2. Rule 11, 19 of Companies (Share Capital and Debentures) Rules, 2014
3. Rule 5 of Companies (Management and Administration) Rules, 2014
4. Table F of Schedule- I of the Companies Act, 2013

Mandatory Requirements:

1. Intimation about transmission of securities along with evidence of succession
2. Delivery of securities so transmitted, within 1 month from the date of receipt of intimation of transmission of securities.

Procedure:

1. Submission of Request Form by Legal Heir or Nominee of Deceased Member:
   In the event of demise or insolvency of the registered shareholder, the legal heir or person so nominated may submit a written request stating whether he has opted to register himself as the holder of securities or transfer such securities, accompanied with the following documents:
   • Original death certificate/Copy of death certificate, attested by the nominee
   • Original share certificate(s)
   • Succession Certificate/Probate of Will
   • No Objection Certificate (NOC) from other heirs, if applicable
   • Orders of the Court/competent authority, if applicable
   • Copy of Pan card, attested by the nominee.
   NOTE
   1. Persons Eligible to apply for the transmission of shares on the death of the member:
   • Survivor(s) (in case the shares are held jointly)
   • Nominee(s)
   • Legal representatives
   • Any other person duly nominated to this effect.
   2. Regulation 23 of Table F 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 member are abstained from getting registered as joint holder along with surviving holder.
   3. On the death of the sole member in One Person Company, the person nominated by such member shall be the person recognized by the company as having the title to all the shares of such member and such nominee shall be informed about the same.
2. Deliver the Certificate of Securities:
   
   • The company shall upon receipt of all the documents pertaining to transmission of securities and reviewing the same to its satisfaction, approve such transmission in favor of the successor by passing a Board Resolution to this effect, in a duly convened board meeting.
     Please refer to the Procedure for Conducting Board Meeting for further details.
   • The company shall endorse the Certificate of Securities specifying the shares held, in Form SH-1 (in case of Shares only) and deliver the same to the transferee within a period of 1 month from the date of receipt of the intimation of transmission by the company.
     NOTE:
     • Where the claimant for transmission of Shares of the deceased shareholder, is unable to produce the original share certificates, the company should issue duplicate share certificates after complying with the procedure.
     • The legal representative or nominee of the deceased member shall:
       • be entitled to the same dividends and other advantage to which he would be entitled if he were the registered holder of the Shares
       • not be entitled to exercise voting rights or other rights in a general meeting unless he is registered as a member in respect of the Shares.
3. Making entries in Register of Members and Debenture Holders:
   The company shall make necessary entries pertaining to the transmission of securities, in the Register of Members i.e., Form MGT-1 or in the Register of Debenture holders or other securities holder i.e., Form MGT-2, within 7 days of the Board Meeting in which such transmission of securities was approved.
   Key Points:
   • The Board shall at any time, give notice requiring the Nominee to elect either to register himself or transfer such shares, and if such notice is not complied with within 90 days, then the Board shall thereafter withhold the payment of all dividends, bonuses or other monies payable in respect of such shares, until the requirements of the notice have been complied with.
   • Upon becoming a member of the company, such nominee shall nominate any other person with their prior written consent, who shall in the event of the death of such member, become the member of the company.
   • Transfer of any security or other interest of a deceased person in a company, requested by any legal representative shall be valid as if such person had been the holder at the time of execution of such instrument of transfer.
   • A private company limited by shares, shall send a notice of refusal to the person giving intimation of transmission of securities, within a period of 30 days from the date of such intimation, giving reasons thereof for such refusal.