Investing in shares is an excellent move if you plan & execute it properly. But not only to plan before buying the shares, one must also need to ensure the future security & authority of the investments too! But often there are cases where the account holder dies without mentioning any successors. Many times there arrives more than one claiming party and the process of transferring shares becomes very complicated & time-consuming.
In this blog, we are going to discuss the different aspects of transferring shares in case of the deceased individual didn’t appoint any nominee.
Transferring shares to claimant heirs, a complex process with different attributes!
When a person dies, the invested shares are distributed according to his/her will. If the person passes away without leaving a will, there are processes of transferring ownership based on the type of the shares depending on whether the shares are physically documented or held in electronic form.
If the shares are in physical certification, the transfer process needs necessary documents from the claimant heirs along with the share certificates to the registrar of the organization or the transfer agent. All the documents will then thoroughly be verified & based on the verification, it will be decided whether the heir will be entitled to own the shares or not. Once the process is completed successfully, the records are updated & new share certificates are issued to the subsequent legal heirs.
When the shares are in electronic form, the process of transferring ownership becomes a bit more complex. Here, the ownership is recorded in a secured central database managed by a Depository Participant (DP) who is responsible for managing the records of all the transactions of the shares. In this case of transfer ownership the legal heirs of the deceased account holder must have a DEMAT account. Here, all the required documents need to be submitted to the DP. After verification, the authority of the shares will be given to the legal heirs accordingly.
Possible challenges that may arise
If there are multiple bodies that are legal heirs & asking for share ownership, it becomes challenging to distribute the share accordingly. For, maximum cases, the parties are asked to settle mutually. But if it’s still not resolved, it’s advised to go to legal authorities like court for settlement of the disputes.
Also, there are cases, where the account holder passed away with outstanding loans or liabilities. In these situations, sometimes the lenders claim the shares as collaterals! This is a severe matter of concern & the legal heirs must need to manage these things before asking for the ownership of the shares. Otherwise, it will become a serious headache & turn into nothing but a big loss! Here also, they can seek legal counsel to look into this matter & decide if the lender's claim will stay or not.
Documents needed for completing the process successfully
- Death Certificate of the account holder
- Transmission Form
- Notarized Affidavit of the legal heirs who are claiming ownership
- Notarized No Objection Certificate (NOC) from every non-claimant legal heirs
- Copy of the will of the deceased
- Self-attested copy of PAN card & Aadhaar card of the legal heirs who are claiming ownership
- Original Share Certificate
- Legal Heir Certificate
- Notarized letter of Indemnity
Some points to be noted!
- The indemnity bond is a legal precautionary document that protects the transfer agent from any disputes, claims, or liabilities that may arise between the legal heirs or other stakeholders in the future.
- If the value of the account does not exceed 1 lakh, the DP can process the request for authority ownership with minimal documentation including NOC from all legal heirs, an Indemnity letter & Affidavit.
- After the successful transmission of ownership, the DEMAT account will be closed by the DP.
On an ending note
The process of transferring ownership can take a long time depending on the complexities of the situation. The authority is concerned about offering ownership to the proper legal successor of the deceased shareholder. All the verifications, documentation & legal procedures are performed to ensure that the ownership goes to the right person. All the procedures take place under the financial & security exchange rules & regulations of the Government of India and any party concerned can ask for court involvement if any inconvenience is assumed during the process.