SEBI Likely To Accept Panel’s Recommendations For Friendly & Uniform Norms
THERE’S good news for legal heirs awaiting the transmission of shares of deceased shareholders. Market regulator Sebi is expected to accept most of the recommendations of the group that was formed to look into the matter. This will pave way for quick transmission of shares and benefit those who have inherited them in physical form.
Currently, companies follow different systems for transmission of shares in physical form. For instance, HDFC asks its local manager in some cases where the legal heir does not possess succession certificate or the probated will, to carry out verification once it receives the application. The manager then submits a report and the company then acts based on the recommendation. But market participants say this can be a tedious exercise.
The companies would have to fix a threshold limit of 200 shares or Rs 100,000 whichever is higher for transmission of shares after submitting the standardised documents. Companies would require an affidavit, deed of indemnity and a no objection certificate in case there are other legal heirs. The limit will be the basic minimum limit to be adhered to by all listed companies. Those companies that have higher threshold can continue with that.
Transmission means devolution of title to shares otherwise than by transfer, for example, devolution by death, succession, inheritance, bankruptcy, marriage, etc. Transmission is different from ‘transfer’; in transmission a person acquires an interest in the property by operation of law, such as by right of inheritance or succession, whereas, transfer is affected by act of the parties.
In spite of the legislative intent to simplify the transmission procedure, companies have different documentary compliances on the part of the legal heirs of the deceased security holder. In case of many companies, this is so time consuming and tedious that investors do not want to follow it up if the amount involved is not very big.
In transmission case, where titles to shares are passed by operation of law, the beneficiary need not carry out further formalities. A year ago Sebi had constituted a group to address this issue and to evolve an uniform procedure on transmission of shares. The group had unanimously suggested suitable measures to address issues relating to difficulties faced by investors while dealing with transmission of securities in the physical and dematerialised mode. It had also proposed the standardisation of these documents. Once the new process comes into effect, companies, depositories, recognised investors’ associations and Sebi is expected to put awareness on the use of nomination facility at the account opening stage itself. This might also be made mandatory going forward.
There is a need for the depositories to encourage the use of nomination facility in case of demat mode. It should ensure that all its existing accounts are updated with nomination. The DPs as well as companies would be required to ensure that the transmission cases are dealt with in a time-bound manner. BDV-270534-BDV
