Transmission of securities, including shares in demat as well as physical form, often leads to hassles for the nominee or sometimes even the joint account holder. Now there is relief on this front, as the Securities and Exchange Board of India (Sebi) has simplified the procedural work for investors. There are various conditions that need to be followed at the time of transmission of shares and a careful look at the details shows that proper understanding is essential. Transmission of shares refers to a situation wherein on the death of the shareholder these are transferred to the account of the joint holder or the nominee or the legal heir. This refers to a situation specifically on the death of the shareholder, so the conditions for implementation are clearly outlined.
Demat form
If the shares are held in demat mode in a single holder's name without a nominee, then the question arises as to who would these be transferred to and the procedure involved. Currently, if the value of shares is less than Rs 1 lakh per account, then there is a simplified procedure that has to be followed for transmission. The change that has occurred is that Sebi has raised the limit to Rs 5 lakh. This means there will be a lot more cases wherein the transmission process would be covered under these regulations but the figure here covers the value of shares in the account and not holding in a single company.
A simplified procedure can be followed if there is no nomination and in such a situation, the legal heir(s) would have to make an application to the depository participant in the specified transmission form, along with certain documents. The first is a copy of the death certificate, duly notarised. The second is a copy of the succession certificate, duly notarised, or the order of a court of competent authority where the deceased has not left a will. A third document can also be submitted, which is a copy of the probate or letter of administration, duly notarised.
In case the succession copy or the probate cannot be produced, then the legal heir would have to produce some additional documents. This would include (a) A letter of indemnity, duly supported by guarantee of an independent surety made on appropriate non-judicial stamp paper (b) An affidavit made on appropriate non-judicial stamp paper (c) A no-objection certificate from all the other legal heirs who do not object to the transmission.
If the required documents are present, the process can be completed quickly and now with a higher Rs 5-lakh limit, this would be applicable to a larger pool of investors.
Physical form
When it comes to a physical holding in a single holder's name, with or without a nominee, of value not more than Rs 2 lakh per company then a specified procedure would have to be followed. There is, however, an added Sebi condition here, which could make the situation easier for investors as companies have been allowed to fix a limit higher than Rs 2 lakh.
Shares held in a single name with a nominee would require the transmission form signed by the nominee plus the original or copy of the death certificate of the investor, duly attested by a notary or a gazetted officer and a self-attested copy of the nominee's permanent account number (PAN).
If the securities are held in a single name without a nominee then in addition to the documents mentioned above some additional documents may be sought, such as an affidavit on appropriate non-judicial stamp paper about the identification and claim of legal ownership of the securities. For securities up to Rs 2 lakh in value, the additional documents would include (a) a no-objection certificate from the other legal heirs who do not object to the transmission or a family settlement deed duly notarised or attested by a gazetted officer b) indemnity on non-judicial stamp paper. In case the value of shares is more than Rs 2 lakh then the additional documents would include a succession certificate or a probate of will or letter of administration or court decree.
Here also the procedure is not too long as the list of documents is clearly laid out. If the overall limit is higher then a larger number of transactions would fall under the simplified procedure. An element that would need to be considered is that in the physical process for applying the Rs 2 lakh limit, the value is to be considered per issuer company and not for the portfolio of the investor as a whole. This makes a huge difference as the overall portfolio could be higher but if the individual holding is lower then the simplified conditions would apply. This value would be calculated on the date of the application; so that has to be kept in consideration, too.
LIFE MADE EASY FOR INVESTORS
Demat form
If the shares are held in demat mode in a single holder's name without a nominee, then the question arises as to who would these be transferred to and the procedure involved. Currently, if the value of shares is less than Rs 1 lakh per account, then there is a simplified procedure that has to be followed for transmission. The change that has occurred is that Sebi has raised the limit to Rs 5 lakh. This means there will be a lot more cases wherein the transmission process would be covered under these regulations but the figure here covers the value of shares in the account and not holding in a single company.
A simplified procedure can be followed if there is no nomination and in such a situation, the legal heir(s) would have to make an application to the depository participant in the specified transmission form, along with certain documents. The first is a copy of the death certificate, duly notarised. The second is a copy of the succession certificate, duly notarised, or the order of a court of competent authority where the deceased has not left a will. A third document can also be submitted, which is a copy of the probate or letter of administration, duly notarised.
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In case the succession copy or the probate cannot be produced, then the legal heir would have to produce some additional documents. This would include (a) A letter of indemnity, duly supported by guarantee of an independent surety made on appropriate non-judicial stamp paper (b) An affidavit made on appropriate non-judicial stamp paper (c) A no-objection certificate from all the other legal heirs who do not object to the transmission.
If the required documents are present, the process can be completed quickly and now with a higher Rs 5-lakh limit, this would be applicable to a larger pool of investors.
Physical form
When it comes to a physical holding in a single holder's name, with or without a nominee, of value not more than Rs 2 lakh per company then a specified procedure would have to be followed. There is, however, an added Sebi condition here, which could make the situation easier for investors as companies have been allowed to fix a limit higher than Rs 2 lakh.
Shares held in a single name with a nominee would require the transmission form signed by the nominee plus the original or copy of the death certificate of the investor, duly attested by a notary or a gazetted officer and a self-attested copy of the nominee's permanent account number (PAN).
If the securities are held in a single name without a nominee then in addition to the documents mentioned above some additional documents may be sought, such as an affidavit on appropriate non-judicial stamp paper about the identification and claim of legal ownership of the securities. For securities up to Rs 2 lakh in value, the additional documents would include (a) a no-objection certificate from the other legal heirs who do not object to the transmission or a family settlement deed duly notarised or attested by a gazetted officer b) indemnity on non-judicial stamp paper. In case the value of shares is more than Rs 2 lakh then the additional documents would include a succession certificate or a probate of will or letter of administration or court decree.
Here also the procedure is not too long as the list of documents is clearly laid out. If the overall limit is higher then a larger number of transactions would fall under the simplified procedure. An element that would need to be considered is that in the physical process for applying the Rs 2 lakh limit, the value is to be considered per issuer company and not for the portfolio of the investor as a whole. This makes a huge difference as the overall portfolio could be higher but if the individual holding is lower then the simplified conditions would apply. This value would be calculated on the date of the application; so that has to be kept in consideration, too.
LIFE MADE EASY FOR INVESTORS
- Transmission is the transfer of shares after the death of the existing holder
- Demat shares in a single name without a nominee will now have a Rs 5-lakh limit transmission
- The earlier limit for such a procedure was Rs 1 lakh
- For physical shares, in single name without a nominee, transmission will be applicable for holdings up to Rs 2 lakh
- Companies have been allowed to fix a limit higher than Rs 2 lakh if they want