TRANSMISSION OF SHARES
Concept
Transfer of title in shares upon the death of a registered holder by operation of law if the holder dies intestate and by his act, if he leaves a will.
Governed by
- Company's Articles of Association
- Companies Act, 1956
- Indian Succession Act 1925, Hindu Succession Act 1956 and other allied Acts.
RE: JOINT HOLDING
Model Articles of Association recognize only the surviving shareholder(s) as having any title to the shares registered in the name of such Member.
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Therefore, in the case of joint holdings, the transmission is effected by simple deletion of the deceased name from the register of members, on the basis of the request received from the surviving jointholder or jointholders, supported with the death certificate of the deceased.
In cases the joint holding is claimed by third parties other than the jointholder (s) either on the strength of the probated will of the deceased (whether principal holder or one of the joint holders) or on the strength of a succession certificate, the provisions of Article should be cited and such transmission should not be considered unless the claimants produce a specific no objection / consent in writing from the surviving joint holder(s) concerned or unless a court order to the contrary is produced by the claimants.
RE: SINGLE HOLDING
¨ IF THE HOLDER DIES TESTATE: ( HAS LEFT A WILL)
As per the provisions of Section 213, the executor or legatee of the will can establish his right only by getting the will probated by the court of competent jurisdiction, or by obtaining letters of administration in respect of the will. Generally, the provisions of Section 213 WILL APPLY to all wills and codicils made by any Hindu, Buddhist, Sikh or Jaina AFTER 1ST SEPTEMBER 1870 within the local limits of the ordinary original civil jurisdiction of the High Courts at CALCUTTA, MADRAS AND BOMBAY
However, this Section shall not apply in the following cases:
a] If the will is made by Muhammadans
b] In the case of wills made by any Parsi after 1962 where such wills are NOT made within the
local limits of the ordinary original civil jurisdiction of the High Courts at
CALCUTTA, MADRAS AND BOMBAY
¨ IF THE HOLDER DIES INTESTATE: ( WITHOUT LEAVING A WILL)
As per the provisions of Section 212, No right to any part of the property of a person who has dies intestate can be established in any Court of Justice, unless letters of administration have first been granted by a court of competent jurisdiction. However, as per sub-section (2) thereof, this provision shall not apply in the case of a Hindu, Muhammadan, Buddhist, Sikh, Jain, Indian Christian or Parsi.
Usually a Company's Articles contain a specific provision for transmission of shares, whereby the executors or administrators of a deceased Member (not being one of two or more joint-holders) shall be the only persons recognised by the Company as having any title to the shares registered in the name of such Member and the Company shall not be bound to recognize such executors or administrators shall have first obtained Probate or Letters of Administration, as the case maybe, from a duly constituted Court in the Union of India. However, this Article would also provide absolute discretion by the Board to dispense with these requirements if it thinks fit.
The power of the Board to be exercised in this behalf is discretionary, to be exercised having due regard to the facts and circumstances of each case and it cannot be compelled to dispense with the succession certificate. Generally, in cases of small holdings the requirement of succession certificate is dispensed with and incases of larger holdings, such cases are not considered, quoting the high market value. However, the Company Law Board, in Pusha Vandera v Thomas Cook (India) Ltd., held, inter alia, that while the size of a shareholding may have some relevance, its value had none and directed the Co to register the transmission on the basis of indemnity bond with guarantees for the value of the shares.
There are certain places like Goa, etc., exempted from the purview of the Indian Succession Act, due to such provinces being part of former union territories / former non-British colonial governments. There are also certain religious sub-sects being exempted under various Central / State Acts / Notifications being issued from time to time.
In view of the intricacies and the need for harmony in complying with the l provisions of Law and the Articles of the Company laid down to safeguard the Company's interest at large, care should be take to ensure that the correct procedure as may be applicable on case to case basis is advised to the claimants. At the 1st instance when the claimants ask for the prouder, the standard procedure asking for probated copy of the will, where the shareholder died testate and succession certificate/letter of administration, etc., where the shareholder died intestate. If the claimants writes quoting non-application of the probate/succession requirements in the 1st instance it self or subsequently or quoting any other difficulty, suitable view should be taken on case to case basis.
