SS - Old - 06 - Transmission of Shares and Debentures - Secretarial Standards

SS-6 Secretarial Standard on Transmission of Shares and Debentures The following is the text of the Secretarial Standard-6 (SS-6) on Transmission of Shares and Debentures issued by The Institute of Company Secretaries of India. In the initial years, adherence by a company to this Secretarial Standard will be recommendatory. In this Secretarial Standard, the Standard portions have been set in bold type. These should be read in the context of the background material which has been set in normal type and in the context of the Preface to the Secretarial Standards . Introduction The word transmission means devolution of title to Shares otherwise than by transfer. On transmission of Shares, the person to whom the Shares are transmitted becomes the registered shareholder of the company and is entitled to all rights and subject to all liabilities attached to the Shares. In case the deceased held Shares in more than one company, the legal heir(s)/Nominee has to correspond with each of the companies by submitting relevant documents, alongwith the share certificates to effect transmission of Shares. In case of dematerialised holdings, the formalities for transmission of all securities can be completed by submitting the documents required by the Depository Participant. Scope This Standard applies to Transmission of Shares held by individual shareholders in physical mode. Definitions The following terms are used in this Standard with the meaning specified: Act means the Companies Act, 1956 or any statutory modification or re-enactment thereof. Administrator means a person appointed by competent authority to administer the estate of a deceased person when there is no Executor. Articles means the Articles of Association of a company. Board means the Board of Directors of a company and includes a committee constituted by the Board. Depository Participant means a person registered as such under the Securities and Exchange Board of India Act, 1992. Executor means a person to whom the execution of the last will of a deceased person is, by the appointment of the deceased, confided. Heir means any person who is entitled to succeed the property of a deceased under applicable laws. Intestate means the deceased had not made a testamentary disposition of property. Legal Representative means a person who in law represents the estate or interests of another person. Member means any person who agrees, either by subscribing to the Memorandum of Association of the company or by applying in writing, to become a Member of the company and whose name is entered either in the Register of Members of the company or in the records of the depository as a beneficial owner in respect of the Shares of the company held by him. Minor means any person subject to the Indian Majority Act, 1875 who has not attained his majority within the meaning of that Act, and any other person who has not completed the age of eighteen years. Nominee means an individual named in accordance with the Act by a shareholder(s) whose Shares should vest in such an individual on the death of the shareholder(s) and that individual need not be a legal heir. Probate means the copy of the Will certified under the seal of a Court of competent jurisdiction with grant of administration to the estate of the deceased. Shares include debentures. Transmission means passing of property in Shares, other than by way of transfer, by operation of law consequent to the death or insolvency of the member. Will means the legal declaration in writing of the intention of a person with respect to his property which he desires to be carried into effect after his death. Unless the context otherwise requires, words and expressions used herein and not defined shall have the meaning respectively assigned to them under the Act. Secretarials Standards Transmission of Shares should be effected by the company on receipt of intimation of death of a Member and on production of necessary documents, such as- (i) Death certificate; (ii) Request for transmission signed by the legal heir(s)/Legal Representatives/claimant(s) with their specimen signature(s); (iii) Succession Certificate or Letter of Administration or Probate of Will; (iv) Original share certificate(s); (v) Orders of the Court or of competent authority, if applicable; (vi) Permission under the Foreign Exchange Management Act, 2000, if applicable. The company may require documentary evidence to prove the identity of the legal heir or other claimants, such as PAN Card, Passport, Ration Card, Voter s Identity Card, etc. The documentation required for effecting Transmission of other securities including fixed deposits would remain the same. To facilitate transmission of Shares in appropriate cases, the company may waive production of certain documents, such as Probate or Letter of Administration or Succession Certificate. However, in such cases, the company may insist on a suitable Indemnity and affidavit. Section 109 provides for transfer of the Shares by the Legal Representative of the deceased Member. Section 109A provides for nomination by an individual in respect of his Shares. Where a Nominee has been appointed, the Shares shall vest in the Nominee on the death of the Member. As per Section 109B , on death of the shareholder, the Nominee has the option to elect either to register himself as the holder of the Shares of the deceased or transfer the Shares to any other person. The transferees need not be the legal heirs of the deceased shareholder(s). Similar rights are available to a person becoming entitled to Shares consequent to the insolvency of a Member in cases of companies having provisions akin to Regulation 26 of Table A of Schedule I to the Act in their Articles. Nomination assumes significance in transmission. The company should maintain particulars of the Nominee in a separate register and confirm to the shareholder of having noted the nomination. It is recommended that this information is also recorded in the Register of Members with cross-reference to the register maintained for recording nomination. In case the Nominee is a Minor, on death of the shareholder during the minority of the Nominee, the Shares should be transmitted to the Minor under the guardianship as mentioned in the nomination form till the Minor attains majority; however, the beneficial interest will be with the Minor. In case the Shares were held by a lunatic or insolvent, the company may insist on an order of a Court of competent jurisdiction declaring such person to be of unsound mind or insolvent and appointing a Legal Representative or Administrator as the case may be to deal with his estate. If the Articles of the company provide otherwise, it shall override the principles of the Standard. 1. Transmission of shares held singly With nomination 1.1 Where a sole shareholder who has appointed a Nominee dies, the company should on receipt of written notice signed by the Nominee accompanied by the certificate evidencing the death of the shareholder and the original share certificates, register the Shares in the name of the Nominee within a period of 30 days. 1.2 Where a sole shareholder who has appointed a Nominee dies, the company should on receipt of written notice signed by the Nominee accompanied by the certificate evidencing the death of the shareholder and the original share certificates with duly executed transfer deed, register the Shares in the name of any other person elected by him, within a period of 30 days. The Nominee has the option to elect either to register himself as the holder of the Shares of the deceased or transfer the Shares to any other person. For this purpose, the Nominee should give notice of his intention. All limitations, restrictions and provisions of the Act relating to transfer of Shares will apply. Without nomination 1.3 Where a sole shareholder who has not appointed a Nominee dies leaving a Will, the company should on receipt of written request from the Executor or beneficiary named in the Will accompanied by the certificate evidencing the death of the shareholder and the Probated Will, register the Shares in the names of those persons who are entitled to the Shares as per the Will within a period of 30 days. The Board may at its discretion waive the requirement of probating the Will on production of other satisfactory evidence about the genuineness of the Will. 1.4 Where a sole shareholder who has not appointed a Nominee, dies intestate, the company should on receipt of written request from the legal heir, accompanied by the certificate evidencing the death of the shareholder and the Succession Certificate or Letter of Administration, register the Shares in the name of the legal heir within a period of 30 days. In case the transmission is requested in favour of one or more but not all the legal heirs, the company may require a No Objection Certificate relinquishing their right on the said Shares or Deed of Relinquishment from other legal heir(s) for such transmission. 1.5 Where a sole shareholder who has not appointed a Nominee dies intestate, the company should on receipt of written request from the legal heir, accompanied by the certificate evidencing the death of the shareholder and the Succession Certificate or Letter of Administration together with duly executed transfer deed, register the Shares in the name of any other person elected by him, within a period of 30 days. The legal heir has the option to register himself as the holder of the Shares of the deceased or transfer the Shares to any other person. 2. Transmission of shares held jointly With nomination 2.1 Where Shares are held in joint names and where such holders have together appointed a Nominee, the company should on receipt of written notice signed by the Nominee accompanied by the certificates evidencing death of all the joint shareholders, register the Shares in the name of the Nominee within a period of 30 days. 2.2 Where Shares are held in joint names and where such holders have together appointed a Nominee, the company should on receipt of written notice signed by the Nominee accompanied by the certificate evidencing the death of all the joint shareholders, register the Shares in the name of any other person elected by him, within a period of 30 days. Where joint holders have jointly appointed a Nominee, Shares shall vest in the Nominee, only in the event of death of all the joint holders. Where Shares are held in joint names, on death of any of the holders, the company should on receipt of written request from the survivor(s) accompanied by the certificate evidencing the death of the shareholder, register the Shares in the name of the survivor(s). In such a case the remaining holders are entitled to vary the nomination. Without nomination 2.3 Where Shares are held in joint names and no Nominee has been appointed, on death of the last shareholder who has left a Will, the company should on receipt of written request from the Executor or beneficiary named in the Will, accompanied by the certificate evidencing the death of the shareholder and the Probated Will, register the Shares in the names of those persons who are entitled to the Shares as per the Will within a period of 30 days. The Board may at its discretion waive the requirement of probating the Will on production of other satisfactory evidence about the genuineness of the Will. The legal heir has the option to register himself as the holder of the Shares of the deceased or transfer the Shares to any other person. 2.4 Where Shares were held in joint names and the last of the surviving shareholders died intestate without appointing a Nominee, the company should on receipt of written request from his legal heir accompanied by the certificate evidencing the death of the shareholder and the Succession Certificate or Letter of Administration, register the Shares in the name of the legal heir within a period of 30 days. 2.5 Where Shares were held in joint names and the last of the surviving shareholders died intestate without appointing a Nominee, the company should on receipt of written request from his legal heir accompanied by the certificate evidencing the death of the shareholder and the Succession Certificate or Letter of Administration, together with duly executed transfer deed, register the Shares in the name of any other person elected by him, within a period of 30 days. 2.6 Where Shares are held in joint names and all the shareholders die simultaneously and no Nominee has been appointed, but the first holder has left a Will, the company should on receipt of written request from the Executor or beneficiary named in the Will, accompanied by the certificate evidencing the death of the shareholders and the Probated Will, register the Shares in the names of those persons who are entitled to the Shares as per the Will within a period of 30 days. 2.7 Where Shares are held in joint names and all the shareholders die simultaneously intestate and without appointing a Nominee, the company should on receipt of written request from any of the legal heirs of the first named shareholder accompanied by the certificate evidencing the death of all the shareholders and the Succession Certificate or Letter of Administration, register the Shares in the name of the legal heirs of the first named shareholder within a period of 30 days. In the case of Shares held jointly, the Articles of the company recognize the first named person as the shareholder for the purpose of receiving notice and other benefits, in the absence of any document to the contrary. The legal heir has the option to register himself as the holder of the Shares of the deceased or transfer the Shares to any other person. 3. Other requirements 3.1 On transmission, share certificates shall be endorsed in the name(s) of the person(s) to whom the Shares are transmitted. Where the claimant for transmission of Shares of the deceased shareholder, is unable to produce the original share certificates, the company should issue duplicate share certificates after complying with the procedure. 3.2 Every company should maintain a register containing particulars of all transmissions. The Register maintained for recording Transmission should be placed before the Board to authorize registration of transmission. In token of approval, the Chairman of the Board should date and initial at the end of the last entry in the Register for each set of approvals. The Company Secretary or any other authorised person should make necessary changes in the Register of Members. 3.3 The register and records pertaining to transmission should be preserved permanently and kept in the custody of the secretary of the company or any other person authorized by the Board for the purpose. Detailed reference pertaining to this Register has been made in the Secretarial Standard on Registers and Records (SS-4). Effective Date This standard is effective from 20th September 2007.