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Contrast between SEBI and IEPF rules pertaining to Demat of Old Transfer Deed cases pertaining Physical Shares

Contrast between SEBI and IEPF rules pertaining to Demat of Old Transfer Deed cases pertaining Physical Shares

08, Jan 2019

Big relief by SEBI in old transfer deed cases seems to be confronted by RTA by saying that the shares have been transferred to IEPF.

As per Rule 6(3) (d) of IEPF Rules, 2016 read with Section 124(6) of the Companies Act, 2013, if dividend is unclaimed for 7 years, shares pertaining to those unclaimed dividend would be transferred to IEPF.

 

As per Rule 6(3)(d) of IEPF Rules, 2016; for effecting the transfer of physical shares to IEPF, Company Secretary / Authorised person of Board of Directors shall make an application, on behalf of shareholders to the company for issue of duplicate share certificates. On receipt of application, company shall issue duplicate share certificate and those shares will be transferred to IEPF through SH-4 form. Shares will be dematted in favour of IEPF till the actual claimant approaches company. Further in case of claim of shares by investor, IEPF will transfer shares from it’s demat account to investor’s demat account.

 

However on November 06th, 2018, SEBI issued a Circular (SEBI/HO/MIRSD/DOS3/CIR/P/2018/139) regarding transfer of shares with transfer deeds executed prior to December 01, 2015 and allowed transfer of shares subject to fulfilment of certain conditions by transferee.

 

The motive of SEBI to bring this notification was to mitigate the practical difficulties faced by Transferee who could not lodge the shares for transfer within 1 year from the date of transfer deed and was pending since many years due to Non-availability of PAN of transferor or mismatch of signature of transferor or any other reasons.

 

It seems that the purpose of SEBI’s notification is defeated as the shares which have been transferred to IEPF are not being considered for transfer to the transferee by RTAs (Registrar and Transfer Agents) and transfer claims are being rejected.

 

What is the Disconnect?

IEPF gives back shares to shareholder (ideally whose name appearing as member on the register of member company) but what about someone who bought the shares from shareholder long back and he / she is holding the physical share along with transfer deed who is yet to become shareholder of the company? This needs clarification by IEPF.

 

On one side SEBI allowed transfer of shares with old transfer deed which were pending since many years, by bringing this new notification and on another side RTAs reject such claims due to shares being transferred to IEPF. Thus it is contradiction of the rules / provisions of transfer of shares by two different Authorities of Ministry of Corporate Affairs, Govt. of India i.e. SEBI and IEPF.

 

As per Rule 6(3) (d) of IEPF Rules, company issues the duplicate share certificates against shares which are lying in physical form, thus rendering the physical shares lying with Transferees invalid and consequently claim of Transfer of Shares being rejected by RTAs. Further, to add to the irony of Investors / Transferees, there is no way out given to Investors / Transferee by RTAs, SEBI or IEPF and this has created ambiguity to the investors / transferees who has genuinely purchased the share from the shareholder

 

What Needs Clarification by IEPF?

 

Considering the spirit of the SEBI notification and interest of investor at large, IEPF need to provide clarity in the matter of Old transfer deed cases and, allow the transfer of shares in the name of the person who is holding Original Shares, Original Transfer Deed , which establishes the genuinity of  buyer.

Author,

Vikash Jain

Happy Investing

Please free to reach out to us at Samadhan@sharesamadhan.com

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Physical to Demat deadline extended till 31st March-2019.

Physical to Demat deadline extended till 31st March-2019.

04, Dec 2018

December 5th, 2018 deadline to covert physical shares into demat is now extended till 31st March 2019

SEBI vide press release (2018 PR No.: 49/2018) dated 3rd December, has extended the deadline and the requirement of transfer of securities only in demat form shall now come

SEBI, on March 28, 2018, decided that except in case of transmission or transposition of securities, requests for effecting transfer of securities shall not be processed unless the securities are held in the dematerialized form with a depository. This measure was to come into effect from December 5, 2018. Subsequently, SEBI has received representations from shareholders for extension of the date of compliance which now vide “”3rd December 2018 Press release” has been extended till 31st March 2019 thereby providing soothing relief to lakhs of investor.

On 6th November 2018 circular of SEBI gave a perfect Diwali bonanza for Investor who is finding it difficult due to cumbersome and ambiguous process to transfer their Old physical shares

SEBI received lot of representations, highlighting difficulties faced by transferees in providing documents for effecting transfer of securities and the documents sought used to vary across RTAs (Registrar & Transfer Agent) for cases relating to transfer of old shares in physical form where PAN card of transferor not available, name mismatch, signature mismatch etc. SEBI has laid down standard process in such cases so that there remains not ambiguity.

While 6th November-2018 circular gave reasons to Cheer and 3rd December 2018 Press release (regarding extension of timeline) has put icing on the cake – Big relief to the investors at large.

Author,

Vikash Jain

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Why SEBI should extend Dec 5th timeline on demat of physical shares?

Why SEBI should extend Dec 5th timeline on demat of physical shares?

30, Nov 2018

December 5th, 2018 deadline to covert physical shares into demat is just giving sleepless nights to lakhs of investors in the country.

On 8th June 2018, SEBI has notified vide Notification No. SEBI/LAD-NRO/GN/2018/24  by issuing SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) (FOURTH AMENDMENT) REGULATIONS, 2018 that except in case of transmission or transposition of securities, requests for effecting transfer of securities shall not be processed unless the securities are held in the dematerialized form with a depository. In other words, there will not be any transfer of physical share after 5th December 2018.

 

According to this amendment, the requests for effecting the transfer of listed securities shall not be processed after 5th December 2018 unless the securities are held in the dematerialized form with a depository. Therefore, for effecting any transfer, the securities shall mandatorily require to be in demat form.

 

Then came November 6th , 2018 circular of SEBI

 

A welcome move by SEBI came when the country was in the festive mode of Diwali. A perfect Diwali bonanza for Investor who is finding it difficult due to cumbersome and ambiguous process to transfer their Old physical shares

 

SEBI received lot of representations, highlighting difficulties faced by transferees in providing documents for effecting transfer of securities and the documents sought used to vary across RTAs (Registrar & Transfer Agent) for cases relating to transfer of old shares in physical form where PAN card of transferor not available, name mismatch, signature mismatch etc.

 

Vide circular SEBI/HO/MIRSD/DOS3/CIR/P/2018/139 dated 6th November 2018, SEBI laid down Standardized Norms for transfer of Securities in physical mode

 

SEBI 6th November-2018 circular gives reasons to Cheer but haunted by 5th December 2018 deadline: Reason for extending December 5th deadline

 

A welcome move by SEBI vide 6th November 2018 circular to standardized the norms to transfer old physical share certificates to the rightful owner would not serve any purpose if December 5th deadline by SEBI is not being extended.

 

After SEBI’s 6th November circular, all listed companies, RTA and even SEBI themselves were caught up with continuous query flow from end number of an investor seeking clarification about the circular.  On the other side if SEBI remain adhered to December 5th deadline then it would just defeat the purpose of having November 6th circular which is considered to be most investor-friendly circular as it would be simplifying the process of ownership transfer of physical shares where the transferor is not traceable or having PAN or signature mismatch issues.

 

There was a recent article in the national leading newspaper The economic times with a caption Physical shares turn 'illiquid' after 5 Dec; 4% of Sensex scrips still in non-demat form. This is just tip of the iceberg. There are more than 5000 listed companies in India where crores of rupees of physical shares are just lying.

 

Can holder continue to hold shares in Physical form? 

 

Yes, the holder can continue to hold the shares in physical form but one cannot transfer the same in physical form.

 

Hoping to have much sought after extension from SEBI thereby extending December 5th deadline.

Author,

Vikash Jain

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Pending Old Share Transfer Cases? Big relief by SEBI for transfer of securities in physical mode.

Pending Old Share Transfer Cases? Big relief by SEBI for transfer of securities in physical mode.

22, Nov 2018

A perfect Diwali bonanza for Investor who is finding it difficult due to cumbersome and ambiguous process to transfer their Old physical shares

If you are facing the followings issues in the process of Transfer of physical shares then there is sigh of relief to lakhs of investors by Securities Exchange Board of India (SEBI)

  • Not having PAN card of the Transferor of Share?
  • Issues relating to Mismatch of name in PAN card vis-à-vis name on share certificate/ transfer deed?
  • Major mismatch / Non-availability of transferor’s signature?

What was the Issue?

SEBI received lot of representations, highlighting difficulties faced by transferees in providing documents for effecting transfer of securities and the documents sought vary across RTAs (Registrar & Transfer Agent) for cases relating to transfer of old shares in physical form where PAN card of transferor not available, name mismatch, signature mismatch etc.

Welcome gesture by SEBI : Setting up of Standardized Norms for transfer of Securities in physical mode

SEBI vide its circular dated 6th November have tried clarify various issues / difficulties being faced by investor to effect transfer of their securities in physical mode. This circular is issued under Regulation 101 and 102 of LODR to address the difficulties faced by investors in transfer of physical shares.

Let’sglance throughthese standardized norms for transfer of Securities in physical mode

1. Non-availability of PAN of the transferor for transfer deeds:

  • Transfer deeds executed prior to December 01, 2015: It has been clarified by SEBI that transfer deeds executed prior to notification of LODR (i.e., December 01, 2015) may be registered with or without the PAN of the transferor as per the requirement of quoting PAN under the applicable Income TaxRules.

In other words, any transfer deed executed after December 01, 2015 need to have PAN number of the transferor for effective transfer

2. Mismatch of name in PAN card vis-à-vis name on share certificate/ transfer deed:

Investors have been facing issues relating to mismatch in name due to marriage, name change etc.  In such cases, transfer shall be registered on submission of any of the four following additional documents explaining the difference innames:

  • Copy of AadharCard
  • Copy of legally recognized Marriage Certificate
  • Copy of gazette notification regarding change in name
  • Copy ofPassport

3. Major mismatch / Non-availability of transferor’s signature:

There are multiple cases where the transferor did not take efforts to update his signature since he had already received the consideration for the transfer. Further, in many cases, the transferors could not be tracednow.

To address this major issue where the buyer felt stranded, SEBI laid down the following procedure / documentation for registration of transfer of securities, in such cases:

I. RTA/ company shall follow the procedure as laid down in Para (B)(2) of Schedule VII of LODR for major difference or non- availability of signature of the transferor(s).  The brief procedure in such case is:                                                                                                            the transferor is required to update his/ her signature by submitting bank                                                                        attested signature along with an affidavit, cancelled cheque to the                                                                                  RTA/company and contact details of the transferor

II. Issuers / RTAs shall make efforts to contact the transferor by tracking dividend history / by contacting bank, KRAs anddepositories. Issues / RTA shall try contacting the transferor by

  1. checking the Dividend history and obtaining the current contact details from the bank where dividend was encashed.
  2. from the address, email ids and phone numbers, if any, available with theDepositories/KRA

III. Many a times the transferor does not co-operates the buyer. In case of non- delivery of the objection memo                 to the transferor or non-cooperation by / inability of the transferor to provide the required details to the                         transferee, company / RTA shall register the transfer after following the procedure asunder:

1. Following additional documents shall be collected from thetransferee:

  • Copy of address proof - Passport / Aadhar Card / Driving License of thetransferee.
  • An indemnity bond from the transferee in the format prescribed by SEBI
  • An undertaking that the transferee will not transfer/ demat the physical securities until thelock-inPeriod.  These securities shall be under lock-in for a period of 6 months from the date of registration of transfer. The securities so transferred shall bear a stamp affixed by the company / RTA stating that these securities shall be under lock-in.  RTA may also verify the documents submitted by the transferee with the KYC details, if any, available with the Depositories/KRAs.

2. Companies / RTAs shall publish an advertisement in at least one English language national daily newspaper having nationwide circulation and in one regional language daily newspaper published in the place of registered office of the listed entity is situated, giving notice of the proposed transfer and seeking objection, if any, to the same within a period of 30 days from the date of advertisement. A copy of the advertisement shall also be published on the company’swebsite.

3. Transfer shall be effected only after the expiry of 30 days from the newspaper advertisement.

4. Names of the transferor, transferee and no. of securities transferred under this procedure shall be disclosed on the company’s website for a period of 6 months from the date of transfer. This information shall also be displayed on stock exchange website as a corporate announcement;

Even in case of non-availability of any document required for transfer and the transferor is not cooperating or not traceable, companies/ RTA shall register the transfer by following the procedure as specified in case of major mismatch / non-availability of transferor’s signature.

LODR regulation also require that the transfer shall be registered only ifthe address of the transferor submitted in the bank attestation matches with the address recorded in the records of the company / RTA. However, many a times the address as available with the company, as per old records, may not match with the current address attested by the bank and this has resultedinrejectionoftransferrequestscausingunduehardshipto

investors. A welcome move by SEBI to make this hassle simple. In such case where the bank attested address of the transferor differs from the records available with the company / RTA, companies/ RTAs shall register the transfer by updating the new address as attested by the bank.

SEBI circular of 6th Nov is a light at the end of the tunnel but 5th  December timeline is haunting badly

Though the recent circular is soothing the wound of lakhs of investor by simplifying the norms to for transfer of securities in physical mode but December 5th deadline to covert physical shares into demat is potentially acting as threat to heal the wound. If there is no extension beyond 5th December then there will not be any relevancy of this circular as the investor will not be able to get their transfer of shares in less than 30 days’ time.

Let’s hope to get extension of 5th December timeline.

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Mis-selling, pendency of claims to blame for insurance disputes- Share Samadhan

Mis-selling, pendency of claims to blame for insurance disputes- Share Samadhan

05, Sep 2018

The Tribune 

Tribune News Service

Chandigarh, September 3

Insurance companies cajole customers to buy life, non-life and mediclaim policies, but they have hundreds of excuses to reject their claims. For instance, they reject the claim of engine breakdown if the policyholder restarts the vehicle in the monsoon deluge.

Mediclaim policyholders also face similar situations. Recently, a Chandigarh-based patient, who was admitted to the emergency ward of a private hospital for some gastro-intestinal disorder, was denied cashless facility only because he told the doctor that he takes alcohol once in a blue moon. The third-party administrator quickly showed him the “policy exclusion clause 4.8” and denied the cashless facility.

There are ways to get away with such knotty conditions, which customers often ignore while buying a policy. According to Amit Singh, executive director, Palm Insurance Brokerage, "In such case, the policy holders should buy a comprehensive policy with ‘engine protection’ cover, to avoid inconvenience at the later stage". Many insurance experts agreed that agents often conceal such practical issues while selling policies.

For the instance case of mediclaim rejection, doctors advise that patients should not disclose alcohol drinking even if it is occasional to avoid the draconian clause. The Insurance Ombudsman office agreed that there is a rise in claim-related grievances.

"There has been constant increase in number of complaints filed at Consumer Disputes Redressal Forums and insurance ombudsman. The need to the hour is to bring transparency in the system. At the time of selling policy, terms and conditions are not made clear to the consumers, the consumer comes to know only at the time of settlement," said Share Samadhan co-founder Abhay Chandalia.

According to a report issued by the office of ombudsman, Chandigarh, the authority received a total 2,122 complaints in 2017-18. 

A senior official at the ombudsman office said, instances of mis-selling of insurance products through bank branches are also on the rise. Customers easily give in to the aggressive marketing techniques of some bank employees primarily on account of the trust reposed in the bank. Mis-selling refers to certain ‘unfair business practices’, including wrong sale of product, loading on products and promise of higher returns whereas in non-life, health insurance and motor vehicle cases constituted major portion of complaints.

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