In this blog, we will explain what exactly happens if a shareholder dies.

An Overview in Brief.

There are several situations. Let me elucidate those:

1. If the shareholder who has passed away held shares in a Demat account or not.


2. We need to figure out if the person who passed away owned shares jointly or had someone as a nominee, or if he was the only one holding a demat account.


3. For demat account holders, if the value of shares is less than 5 lakhs or greater upon demise, and for non-demat account holders, if it's less than 2 lakhs or greater.

When a shareholder dies without transferring shares, transmission rules apply.

Difference between transfer and transmission of shares.

Transfer of shares refers to the process where an existing shareholder (transferor) voluntarily transfers their ownership or title of shares to another person (transferee).

Transmission of shares refers to transferring to another person (transferee) upon the death, bankruptcy, or insolvency.

We will first discuss situations where the shareholder did not have a demat account. This is because most cases are from 20 years ago when creating a demat account was uncommon.

Under such circumstances, what procedure should be followed for share transmission?

If there is only one shareholder and no nominee has been appointed, the shares will be transferred to the nominee upon the execution of an indemnity cum affidavit.

The properly completed indemnity cum affidavit, a copy of the deceased's death certificate with attestation by a competent authority, and the original share certificate should be forwarded to the bank or registrar to initiate the transmission process.

If a sole shareholder hasn't designated a nominee but has created a will, the shares will be transferred to the deceased's heirs as stipulated in the probated will.

If the shareholder has passed away without a will and no nominee has been designated, the transfer of shares will only occur after following the necessary procedures.

To accomplish this, the legal heirs need to carry out the following:

• ♦ Surety Form
• ♦ Title Claim Form.
• ♦ Indemnity Bond
• ♦ Affidavit Sworn in by Claimants
• ♦ No Objection Certificate from other heirs favouring a person claiming the title to shares.

In addition to the mentioned documents, a copy of the deceased's death certificate, duly attested by a competent authority, and the original share certificate should be forwarded to the bank.

This procedure does not apply to shares held in dematerialized (demat) form.

What are the steps to follow if the deceased had a demat account?

The joint holder of the Demat account or the heirs of the account must contact a depository participant, who acts as an intermediary between the account holder and their account. Depository participants can be financial institutions, banks, or licensed Securities and Exchange Board members of India (SEBI).

Specific documents must be completed and submitted to the depository participant for the share transfer to family members.

However, if the shares are physical, each company where the account holder has shares must be contacted. It's important to note that transferring shares from one account to another typically takes around 6 to 12 months.

Jointly Held Accounts.

The joint account holder must provide a transmission form and the death certificate. The joint holder should also establish a distinct demat account with the depository participant to receive the shares. It's crucial to ensure that the individual's name is correctly spelled.

Account with Nomination.

In this scenario, the nominee must provide the form and the death certificate. The form can be obtained from the depository participant or downloaded online.

Upon verification of these documents, the process of transferring the shares will commence.

However, if there are legal claimants to the shares, the situation will be more complex and may necessitate legal consultation.

Account without Nomination.

In this situation, the share transfer process becomes more intricate.

In such cases, the primary document of interest is the deceased's will.

If the will mentions multiple individuals, determining the distribution of shares becomes a legal matter that the Court may decide.

If the deceased didn't leave a will, an individual must obtain a succession certificate from the Court. Each legal heir must submit their legal affidavit to the Court for approval.

What if the value of physical shares is less than 2 lacs?

If a shareholder passes away without a will, and the value of their shares is more than Rs 2 Lakhs, a succession certificate becomes necessary.

In simpler terms, a succession certificate is unnecessary if the value of physical shares is below Rs 2 Lakhs (or Rs 5 Lakhs in the case of dematerialized shares).

This certificate, issued by the Court, is granted to the legal heir of a person who passes away without a will.