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Transmission

One of the lesser-known but widely experienced problems with respect to dealing in share certificates is transmission of shares. The Companies Act distinguishes transmission of shares from transfer of shares. 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, marriage, etc. While transfer of shares is brought about by delivery of a proper instrument of transfer (viz, transfer deed) duly stamped and executed, transmission of shares is done by forwarding the necessary documents (such as a notarised copy of death certificate) to the company. 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 case the deceased shareholder had holdings in different companies, then in order to effect transmission of shares for these shares, the relevant documents must be sent to each of the companies, alongwith the share certificates. This results in a heavy reliance on the postal system. Follow-up may have to be made with each of the companies in order get the transmission effected before the book closure, if the survivor(s) wishes to avail of the benefits accrued through these shares.

In the depository system, all these problems are mitigated as the shares are account balances in the electronic form. The process of transmission through the depository is not only simple but it is also quicker. This is because the successor to the title interacts only with one entity - his DP.

Transmission of 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.

Transmission of 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 alongwith 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 under (b) and (c) above, 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.

The nomination facility for shares is provided by amendment in Companies Act 1956. The clients can avail of this facility by furnishing duly filled Form for Nomination available with their DPs. This form contains photograph of the nominee and the other details of the nominee, which help DPs to identify and give effect to the nomination given by the clients.

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 a certified true copy of the death certificate and 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.