In today’s financial environment, shares and securities represent investments as well as individual wealth and legacy. These investments, in the event of death or legal incapacity on the part of the shareholder, demand the transmission of shares and securities.
While the transfer of shares by sale or gifting is the common transfer mode, the transmission of shares occurs by law, happening mainly on the death, bankruptcy, or legal incapacity of the holder. The whole idea is to pass ownership on to a survivor as co-holder, registered nominee, or heir. It is a process through which investments that the deceased holds do not remain idle and do not get misappropriated but are instead passed on to the rightful claimants.
Despite being important, many people, as well as families, are ignorant of the processes and legalities of transmission. The documentation can vary depending on how the account was held; jointly, with a nominee, or singly without a nominee. Furthermore, the legal requirements differ from one to another, whether the shares are held in physical certificate form or a dematerialized (demat) form.
This article provides a detailed overview of the documents that would be required, the legal provisions that would govern them, the eligibility criteria, and procedural requirements for the transmission of shares and securities in India. It also clears some misconceptions and explains the importance of documents such as the succession certificate, legal heir certificate, and probate. Whether you are an executor, nominee, or heir, this guide will help you navigate the process efficiently and lawfully.
What are Shares and Securities?
Shares signify ownership in a company and thus confer rights to profit and assets of the company to its shareholders. The term securities is more general than shares; it covers bonds, debentures, mutual funds, and other forms of financial instruments that can be issued by an entity to raise funds. These instruments can have either a tangible (certificate) form or an electronic form through a depository such as NSDL and CDSL (India) for holding.
What is the Transmission of Shares and Securities?
The transmission of shares refers to the process of transferring ownership of shares, as long as specified conditions hold for the transfer. The transfer occurs upon valid legal documents and happens without any consideration. The legal provisions for the transmission of shares and securities find their basis in Section 56 of the Companies Act, 2013.
Accounts Held Jointly
A surviving joint holder is, however, required to furnish a notarised copy of the death certificate of the deceased joint holder for making an application for deficiency of title. No succession certificate or court order has, however, normally been required.
Account with Nominee
When a nominee is registered, transmission is very simple. The nominee needs to provide:
- filled transmission request form
- Death certificate (notarised copy)
- Self-attested PAN card or ID proof with address. This applies to both physical and demat accounts.
Account without Nominee
This scenario requires additional documentation, as it is more complicated if there are several legal heirs. The general documents required are:
• Notarised death certificate
• Self-attested PAN card and address proof
• Specimen signature attested by a bank
• Legal heir certificate or succession certificate
• Affidavit and indemnity bond
• No Objection Certificate (NOC) from other legal heirs
If the value of the securities is above Rs.5 lakh, a court-issued succession certificate or probate of will is compulsory for processing the request.
Legal Provisions
Section 56 of the Companies Act, 2013 provides for the registration of the transmission of companies based on proper documents received. Even if the de-materialized form holds the security, NSDL/CDSL regulations and SEBI guidelines are applicable.
Transmission in law is a transmission that operates by law and is not subject to stamp duty or capital gains tax, unlike transfers of shares.
Eligibility to Transmit Shares and Securities
Any of the parties mentioned below could apply for transmission:
- Joint holders, in case one of the holders dies
- Registered nominee, if the account has one
- Legal heirs or legal representatives, in the absence of a nominee
Eligibility should always be supported with legal proof/documentation that establishes the claimant’s right to the securities.
Benefits of Shares and Securities Transmission:
Transmission of Shares and Securities offers the following benefits:
- Ensure rightful ownership in the eyes of the law
- The legal heirs can resolve claims for dividends, bonuses, and other entitlements.
- Prevention of misuse or wrongful transfer of the deceased person’s assets
- Disputes regarding heirs among themselves would be eliminated through proper documentation.
- Consolidation into legal wherewithal
Documents for Transmission of Shares and Securities
The following is the documentation checklist for the Transmission of Shares and Securities:
A. For Joint Holdings (Demat/Physical)
• Transmission from specific (NSDL/CDSL)
• Notarized copy of death certificate
B. With Nominee
• Transmission request application
• Notarized death certificate
• PAN card/ID and address proof of the nominee
C. Without Nominee (Value up to Rs.5 lakh)
• Death certificate
• PAN card and address proof
• Specimen signature (attested by the bank)
• NOC from other heirs
• Legal heir certificate or family settlement deed
• Indemnity bond (200 stamp paper)
• Affidavit (100 stamp paper)
D. Without Nominee (Value above threshold)
• Death certificate
• Succession certificate or probate, or letter of administration
• PAN, proof of identity, and address
• Transmission request form
Procedure for Transmission of Shares
Given below is the stepwise guide for transmission of shares-
1. Obtain Death Certificate: Get a notarized copy of the death certificate.
2. Claimant Identification: Nominee, surviving holder, or legal heir.
3. Document Preparation: Depending on account type and claimant status.
4. Submission to Company/DP: Apply with documents at the company’s RTA (Registrar and Transfer Agent) or Depository Participant.
5. Verification: Company/DP verifies and approves the request.
6. Transmission Completion: Shares credited/transferred to the new holder, demat or registered in physical records.
7. Update Records: Shareholding information updated in the company register.
Legal Implications and Penalties
Section 56 of the Companies Act, 2013 states the Transmission of Shares. If you fail to comply, the following penal actions will be imposed:
Non-Compliance Penalties
- Company: Fine imposition, which may range from Rs. 25,000 to Rs. 5,00,000
- Officer in Default: Imposition of Fine varies from Rs. 10,000 to Rs. 1,00,000
Effects of Non-Transmission
- Denial of Rights: Unregistered heirs are disallowed to vote and cannot claim dividends.
- Delay in Access to Assets: Likely to be a delay by the heirs in managing or selling shares.
- Possible Conflicts: The transmission may not be settled, resulting in the creation of disputes among heirs or rejection of claims on the part of the company.
Format for the Transmission of Shares
In case of no Will or Probate, a Declaration-cum-Indemnity can be submitted on Non-Judicial Stamp Paper, which should have the following details:
• Deceased details
• Declaration of legal heirs
• Indemnity to the company
• NoC from other heirs
• ID proof and signatures
Besides that, one such sample letter addressed to the Board of Directors can be submitted along with:
• Death certificate
• Original share certificate
• Succession certificate
• Specimen signature of the claimant.
Difference Between Transmission and Transfer of Shares
| Criteria | Transmission | Transfer |
| Nature | Involuntary (by operation of law) | Voluntary |
| Reason | Death, insolvency, or lunacy | Sale, gift, or contract |
| Consideration | Not required | Usually involves a monetary payment |
| Documentation | Legal documents (death cert., succession) | Share transfer deed and consideration |
| Stamp Duty | Not applicable | Applicable |
| Governing Law | Indian Succession Act & Companies Act | Companies Act |
Conclusion
Transferring shares and securities is not just a necessary step; it is essential for connecting the past and future of your investments. By completing the transfer on time, you ensure that the rights and benefits of those investments are passed on to future generations after the shareholder’s death or loss of ability to manage their affairs. In families with several legal heirs, failing to complete this process can lead to disputes or financial losses.
Understanding how to transfer shares allows heirs and nominees to claim their inheritance smoothly. It also protects companies and depositories from false claims and legal troubles by confirming the rightful claimants.
Aside from emotional and practical distractions, knowing the process can simplify things for families and survivors dealing with the necessary paperwork. As India rapidly embraces digital advancements and investment opportunities, understanding share transfer procedures is crucial.
For estate planning and settling affairs after someone’s death, it is important to know how to transfer shares and securities. This protects and preserves financial legacies in a timely and respectful way.
To get expert assistance in the transmission of shares, visit https://investorlink.in/.
Frequently Asked Questions (FAQs)
Transmission of shares refers to the transfer of ownership in shares and securities from a deceased individual or an individual who is legally incapacitated to their rightful heir or nominee or surviving joint holder. Transmission is different from a transfer or sale of shares voluntarily. The transmission process ensures that the shares remain unclaimed or are not misutilized. The transmission is by operation of law and ensures that the financial legacy of the deceased continues without conflicts and litigation.
Transmission and transfer of shares may sound similar, but they are quite different. Transfer refers to something voluntary; Somebody giving or selling his or her shares in consideration to somebody else and, hence, has to pay the stamp duty. On the other hand, when it comes to transmission, they get it through involuntary death, bankruptcy, or incapacitation, and it does not need a sale deed or payment, only legal documents like a death certificate or a succession certificate to prove entitlement.
The need for the transmission of shares and securities arises when the original shareholder passes away, becomes mentally incapacitated, or is declared insolvent. This means that from that moment onward, the shares will not continue to be in the name of the father indefinitely. The law permits it to ensure that investments are passed on to the next rightful person, that is, the nominee, the joint holder, or the legal heir. Proper ownership records are maintained; continuity of entitlements, such as dividends, is ensured, and this prevents misuse or unauthorized access to the shares.
In this case, where there is no nominee registered, the documentation procedure would get heavier. The legal heirs of the deceased will have to apply for transmission along with a notarised death certificate, self-attested identity and address proof, and a legal heir certificate or succession certificate. They may also have to provide an NOC from other heirs along with an indemnity bond and affidavit. For high-value shares, a court-issued certificate becomes compulsory.
It is not always required to obtain a succession certificate, but it becomes mandatory when the value of shares or securities is more than Rs.5 lakh, particularly in cases where no nominee exists. A civil court issues this certificate, whose main purpose is to declare the rightful heir(s) with legal authority. This certificate becomes an important piece of documentation to avoid disputes, especially in events where several parties stake their claims or where inheritance is contested.
Yes, as soon as the shares are transmitted in your name and you are officially registered as their shareholder, you will be able to claim all future dividends, bonus shares, and other benefits. On the other hand, dividends declared before the transmission are usually claimed through the submission of proof of entitlement. Ensure that the transmission is done with great urgency, so that you do not miss any corporate proposals or payments attached to those shares during the process.
Transmission request forms are the compulsory documents that have to be filled in by the nominee, joint holder, or legal heir applying for transmission. These forms contain details about the deceased shareholder, claimants, and a list of securities that are to be transmitted. It must be submitted along with other supporting documents either to the Depository Participant (for dematerialized shares) or the company’s RTA (for physical shares). Processing shall commence only once this form has been submitted.
In case shares are held in both demat and physical forms, then there will be two different processes to be followed by the claimant. For the demat shares, he should contact the Depository Participant, and for the physical shares, they should approach the company’s RTA. Both processes are similar in terms of documentation but require the application of their respective bodies. Upon completion of the transmission, physical shares may simply be dematerialized into electronic form by submission to the DP under a dematerialization request process.
Usually, it takes about 15 to 30 days of working time for transmission of shares to be completed, provided all paperwork therein is in order. But if there are discrepancies in the documentation, legal issues would arise, or there may be waiting for the succession certificate, then the matter may be prolonged. It pays to double-check what’s needed and submit full paperwork to avoid the eventual delay. The processing time would also depend on the restiveness with which the RTA company or Depository Participant works.
The transmission of shares is not fully online yet. Some Depository Participants do provide for online submission of forms and status tracking; however, a majority of the procedures still necessitate the physical submission of original documents, such as a death certificate and identity proof, especially about physical shares and their transmission. For transmission of demat accounts, online initiation is permitted but will still require sending notarized documents to the DP physically.
Giving a self-attested PAN card copy is necessary for the transmission case by the claimant. It serves as the primary ID proof, and the same is required for fulfilling compliance with SEBI and income tax regulations. Moreover, at the time of claiming dividend arrears or for regulatory purposes, particulars of the deceased’s PAN are often required. It is always good to ensure the PAN is updated in the shareholding records before proceeding with transmissions.
Related Blog: How to Transfer Shares After the Death of a Shareholder?