Only a successor has claim over shares, not a nominee: Supreme Court

The Supreme Court (SC) said on Thursday that only successors have claim over shares and debentures, not nominees. Even if a person is a nominee in a share or debenture certificate, they are not entitled to inherit it by default, the Bench of Justices Hrishikesh Roy and Sanjay Karol observed.

The court said that the succession of these instruments (shares and debentures) will be determined by the deceased’s Will or as maintained by succession laws.

It was argued in the apex court that the Companies Act of 1956 and 2013 intend for the nominee in the share/debenture certificate only to aid the process of transferring shares and not to become a successor.

 

A division Bench of the Bombay High Court in the case held that nominees are appointed to ensure that the instruments are protected until the legal heirs or legal representatives of the deceased take steps to claim their rights over them. This decision was challenged in the SC in 2017.