How to Transfer Shares after the Death of Shareholder
The demise of a shareholder can naturally create complications and confusion in the transfer of shares. This necessitates prior precautionary measures. Particularly when a shareholder dies without appointing a nominee, it causes problems for the legal heirs or nominees who wish to claim the assets.
Shares transferred without the appointment of a Nominee can lead to financial wrangles and legal delays, further complicating the procedure of asset distribution. If you are a legal representative or family member of a shareholder, it is necessary to facilitate the transfer of shares following the shareholder’s death.
This article will guide you on how to transfer shares of a deceased shareholder and address the concerns that arise when there is no appointed nominee.
Who Constitutes the Nominee?
Among the simplest ways to ensure that shares are smoothly transferred after your demise is to appoint a nominee. A nominee is the individual you nominate to inherit your shares in case you die. Appointing a nominee reduces the complications, as he is lawfully entitled to the shares in your account. Transferring shares to the Nominee following Death eases the process and ensures that the proper person receives the shares without legal obstacles.
Suppose the Demat account holder has not appointed a nominee. In that case, the shares can be transferred solely with the aid of legal documents, such as succession certificates, wills, or legal heirship certificates. Shares transferred without appointing a nominee can cause unnecessary and inordinate delays, breeding uncertainty and fights among potential legal heirs. This makes it vital to appoint a nominee to prevent these issues from arising.
Process of Transfer of Shares to a Nominee After Death
It is very straightforward to transfer shares on the appointment of a nominee. The following is a sequenced list of a few simple steps that will help you form a better understanding of the process:
Inform the Depository Participant (DP)
The nominee, following the demise of the shareholder, should intimate about the shareholder’s death to the Depository Participant, who serves as an intermediary between the securities depository and the investor. The nominee will then be required to file a Transmission Request Form (TRF) to launch the transfer process. The nominee will next need to file a Share Transmission Request Form (STRF) to initiate the transfer of shares of a shareholder.
Filing of Transmission Request Form (TRF)
The nominee must complete the TRF. It is available from the DP. The forms contain details of the deceased account holder, the nominee, and the relevant shares. The TRF is the crucial relevant document that endorses the transfer of shares to the nominee.
Submission of Supporting Documents
While submitting the TRF, the nominee must also deposit the specified documents:
- Proof of identity for the nominee and updated proof of address (such as a passport or Aadhaar card).
- Death certificate of the deceased shareholder (to prove the demise of the account holder).
- Proof of relations between the deceased and the nominee (if needed).
Certification by the DP
The DP will validate the documents submitted. If all, together with queries, are completely cleared, shares would be transmitted to the nominee’s demat account.
Transmission of Shares
After verification is complete, the shares will be transferred to the nominee’s demat account. If the shares were held in physical form, the new share certificate would be issued in the nominee’s name. In instances where no nominee is appointed, shares transmitted without a nominee would require additional legal processes to ensure a smooth transfer.
What Happens in Case There is no Nominee?
If the shareholder has not nominated a nominee, the process of transferring shares is a bit more intricate. In that case, the Shares Transmitted without nominating a nominee include various steps, and the legal heirs now have to undertake the role of the applicant and follow a detailed procedure in order to claim the shares:
Recognizing the Legal Heir
In the absence of a nominee, the proper legal heirs of the deceased shareholder must be recognized. A family agreement is one method to achieve this or to obtain a legal heirship certificate from the court. Legal heirs comprise the persons to whom the property of the deceased is to be transmitted following their death by law, e.g., wife, parents, spouse, or children.
Succession Certificate or Will
If a shareholder has left a will, it will outline how the assets, which include shares, are to be distributed. The legal heirs may then access the DP to submit the will for validation.
If the will has not been left, the legal heirs will petition the court for a succession certificate to claim their entitlement to the estate, which includes the shares. In the absence of a nomination, the legal heirs are entrusted with the procedure for transferring the shares of a deceased shareholder.
Submit Documents Needed
For the transmission of shares, the legal heirs must present the DP with the specified documents:
- Address proof and Identity proof of the legal heirs.
- No Objection Certificate of Affidavit by other legal heirs, wherever relevant.
- Death Certificate of the deceased account holder.
- Succession Certificate (in the absence of a will)
Verification and Transmission of Shares
After furnishing the different documents, the DP will authenticate them. Shares will be transmitted to the legal heirs’ demat account if the entire documentation checks out in order.
If there is no nominee appointed, this process is important to pass shares to the nominee in case of death.
Transmission of Shares in a Joint Account
Where shareholders hold shares jointly in an account, the transfer is done somewhat differently. When any one of the joint holders dies, the shares are transferable to the remaining joint holder or joint holders, where there is no nominee. The process is needed to make sure shares move when there’s no nominee.
Here’s how it works:
Send in the Form: The person who shared the account with the deceased must give the DP a Transmission Form. They also need to include the death certificate of the shareholder who passed away.
Open a Distinct Demat Account: The surviving joint holder would start a new demat account in the DP where the shares are presently held if that individual does not possess one in his name.
Transfer the Shares: After verification is complete, the shares will be transferred into the surviving joint holder’s demat account. This step is a part of the process for the transfer of shares to the nominee upon death, so that the shares are effectively transferred to the surviving joint holder(s).
Concerns to be Addressed During the Transfer
The said problems should be taken into account to enable the smooth passing of shares:
Implications for Tax: Nominees and/or legal heirs would be liable to capital gains taxes when they sell these stocks.
Apart from Demat Shares: Physical shares take a comparatively longer time to transfer than demat shares, which are relatively simple to transfer.
Legal Disputes: In case of a dispute among heirs due to the absence of a nominee, the case may aggravate the court if there is no will.
Delays: A few shares will be delayed if the required documents are not in order.
Bottom Line
Whether a transferee is available or not, the transfer of shares following a shareholder’s death requires attention to detail and the prompt submission of documents. Suppose the shares are transmitted without the appointment of a nominee. In that case, it entails further legal complications, such as the submission of wills or succession certificates and the identification of the legal heirs. The other side mentions that when shares are transmitted in favor of the nominee, the process is straightforward and entails the minimum number of legal complications.
For anyone who owns shares, it’s a superb idea to appoint a nominee to avoid bottlenecks in the whole process. If you haven’t yet appointed a nominee, it’s in your best interest to do so, as problems may arise at subsequent stages.
In other words, you comprehend these processes, whether through shares transmitted without a nominee or transmitting shares of a dead shareholder in case of a nominee, and, therefore, are assured of the least hassle for your loved ones or family on that subsequent date.
To receive expert assistance in transferring shares following the death of a shareholder, reach out to us.