WHAT IS REGISTRATION OF TRANSMISSION OF SHARES

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Uma asked almost 3 years ago

    1       0 Answer Now Comment Report
4 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered over 2 years ago

Joint holders: In the case of joint shareholding, the surviving joint holders have to intimate the company about the death of any of the joint shareholders and submit an attested copy of the death certificate. Some companies may ask the surviving shareholders to fill a specific form as stipulated by the company, though under the Companies Act no such form has been prescribed. The company will verify the facts and take cognizance of the death and delete the name of the deceased member from the register of members. Consequently, the remaining shareholder(s) will be recognised as registered holders.

    0       0 Comment Report
Important Note – Preparing for CA Final?
CAKART provides Indias top faculty each subject video classes and lectures – online & in Pen Drive/ DVD – at very cost effective rates. Get video classes from CAKART.in. Quality is much better than local tuition, so results are much better.
Watch Sample Video Now by clicking on the link(s) below – 
For any questions Request A Call Back  
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered almost 3 years ago

Joint holders: In the case of joint shareholding, the surviving joint holders have to intimate the company about the death of any of the joint shareholders and submit an attested copy of the death certificate. Some companies may ask the surviving shareholders to fill a specific form as stipulated by the company, though under the Companies Act no such form has been prescribed. The company will verify the facts and take cognizance of the death and delete the name of the deceased member from the register of members. Consequently, the remaining shareholder(s) will be recognised as registered holders. If the first named shareholder dies and there are only two joint holders, then the second named holder will automatically become the first named shareholder. In case there are three or more joint holders, then in the event of the death of the first shareholder, the second joint holder will be registered as first shareholder and third will become second and so on. Singleholder: Maximum number of problems are faced by legal heirs of a deceased shareholder whose shares are registered in a single name only. Similarly, problems also arise when shares are held in joint names and all the joint shareholders pass away, for example, in an accident. In such a case the legal heirs would be entitled to claim the shares and have the same registered in their favour.

    0       0 Comment Report
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Anil Dhawan answered almost 3 years ago

Transmission of shares A transmission of interest in shares of a company, of a deceased member of the company, made by the legal representative of a deceased member shall be considered as transmission of shares by operation of law. This transmission will be registered by a company in the Register of Members. For statutory provisions related to Transmission of share one should refer the following sources: 1. Section 56 of Companies Act, 2013 2. Provisions given in model articles of association given in Table ‘F’ of Schedule-I “Relevant” Text of Section 56 and Rule 11

    0       0 Comment Report
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 DISHANT answered almost 3 years ago

TRANSMISSION OF SHARES Heir today, gone tomorrow It is said that only two things are certain in this world and they are taxes and death. As death is a certainty and its time is unknown, many an investor or rather his legal heirs get caught on the wrong foot after the death of the investor. Joint holders: In the case of joint shareholding, the surviving joint holders have to intimate the company about the death of any of the joint shareholders and submit an attested copy of the death certificate. Some companies may ask the surviving shareholders to fill a specific form as stipulated by the company, though under the Companies Act no such form has been prescribed. The company will verify the facts and take cognizance of the death and delete the name of the deceased member from the register of members. Consequently, the remaining shareholder(s) will be recognised as registered holders. If the first named shareholder dies and there are only two joint holders, then the second named holder will automatically become the first named shareholder. In case there are three or more joint holders, then in the event of the death of the first shareholder, the second joint holder will be registered as first shareholder and third will become second and so on. Singleholder: Maximum number of problems are faced by legal heirs of a deceased shareholder whose shares are registered in a single name only. Similarly, problems also arise when shares are held in joint names and all the joint shareholders pass away, for example, in an accident. In such a case the legal heirs would be entitled to claim the shares and have the same registered in their favour. Transmission of Shares: Transmission by operation of law is not a transfer within the meaning of the Companies Act. Transmission refers to such cases wherein a person acquires an interest in property (shares) by operation of law. Some of the examples of transmission would be right of inheritance, right of succession or acquiring rights as a result of insolvency or lunacy of the shareholder. A situation for transmission would also arise when shares are purchased in a sale effected by court. In case of a transfer, there is a contract between two parties namely, the transferor and the transferee. In addition, there has to be a proper instrument of transfer which has to be duly executed by both the parties and stamped in accordance with law. Besides, the transferor and the transferee have to comply with the provisions of Sec.108 of the Companies Act. In case of transmission, the board of directors of a company has to accept the fact and register the transmission in the records of the company. While in the case of transfer, the board of directors do enjoy certain amount of discretion. In fact, till recently, even in the case of listed companies directors used to enjoy wide discretionary powers in respect of acceptance/rejection of transfers. However, as a result of the Depositories Act and changes in the Securities Contracts (Regulation) Act, today, directors of listed companies are bound to register the shares received for transfer, and, if necessary, they can later approach the CLB for rectification of the register of members. In case of private companies and unlisted public companies, subject to the articles of the company, the directors continue to enjoy wide discretionary powers in respect of transfers. Unlike in the case of transfer, transmission being an event happening by the operation of law, directors of even private companies enjoy little discretion and they have to register the transmission, subject to the satisfaction of the title claimed by the legal heirs. Though companies hardly have any discretion while dealing with cases of transmission, there have been instances where even listed companies have ignored the pleas of legal heirs of deceased shareholders. The recently reported case of Anil R. Chhabria vs Finolex Industries Ltd., and Finolex Cables Ltd.((2,000) 99 Comp. Cas.) highlights this fact. The brief facts of this case are as follows. One R P Chhabria had held certain equity shares in both the companies in his individual name as well as in the name of his HUF and he died intestate in Aug.’87. The petitioner, the son of the deceased shareholder, along with his sisters applied to the company for transmission of the shares held by their late father in their names in Sep.’87. The petitioner was advised by the company to obtain legal representation for the estate of the deceased. Accordingly, the petitioner obtained a succession certificate from the competent court for 100% of the properties. This was later reduced by the court to 75% due to a dispute between the petitioner and his mother. After subsequent appeals, the 75% share of the petitioner was confirmed and he was granted a fresh succession certificate by the competent court. The fresh succession certificate was submitted to the company in early 1997 with a request to register the transmission of 75% of shares held by the deceased in his favour. Unfortunately for the petitioner, instead of registering the transmission, the companies entered into a protracted correspondence with him without taking any action for registering the transmission. In other words, both the companies denied the registration of transmission without saying so in so many words. Frustrated by the attitude of the companies, the petitioner filed a petition before CLB under Sec.111A of the Companies Act on 10 Mar.’98. The petitioner claimed that the inaction on the part of the companies should be deemed to be an act of refusal giving right to the petitioner to approach the CLB. The companies opposed the petition vehemently and raised several objections before the CLB, with a plea that the CLB should not entertain the petition. The CLB considered all the objections raised by the advocate of the companies and negated the same. It directed the companies to register the transmission of the shares held by the deceased shareholder in the name of the petitioner within a period of thirty days. The bench also directed the companies to disburse all the dividends and bonus shares, if any, that might have accrued on those shares, within a period of fifteen days of the registration of the transmission of the said shares. Another interesting case on this subject which has been recently reported is that of Arjun Kumar Israni vs Cipla Ltd. The brief facts of the case are as follows. The appellant’s father died in 1972 and at the time of his death he had held 50 equity shares and some preference shares of the company. The widow of the deceased wrote to the company for transmission of shares held by her late husband in her favour. She was asked to obtain the succession certificate. However, before she could do so, she also passed away. Thereafter, her son, the appellant in this case, obtained the succession certificate and submitted the same to the company in Jul.’94. Notwithstanding the succession certificate, the company refused to register the transmission of shares in favour of the appellant. The reason given by the company was that the Rs 100 shares were sub-divided into shares of Rs. 10 each. Besides, in the meantime, the company had also issued bonus shares. So the company asked the appellant to get the succession certificate amended so as to reflect the prevailing market value of the shares. This attitude of the company was totally uncalled for and the appellant rightly approached the CLB for relief. The company’s plea was that it had never refused to register the transmission of shares and that it had just asked for an amendment in the succession certificate so as to reflect the current market value of the shares as the value indicated by the appellant was incorrect. The CLB, after considering the contentions of the company and keeping in view the previous legal case on the subject, held that the very fact that the company asked the appellant to obtain an amended succession certificate amounted to refusal and therefore the appellant was within his rights to approach the CLB. The CLB also noted that the succession certificate granted by the court was for the estate left behind by the deceased at the time of his death. Consequently, it was held by the CLB that the appellant was entitled to all the bonus shares and the dividends accrued thereon. Another plea raised by the company was that the succession certificate carried insufficient court fees stamps. On this point, the CLB held that it was for the court to note the adequacy of proper court fees and the company could not withhold the transmission of shares on this ground. Ultimately, the CLB rejected all the contentions raised by Cipla Ltd. and directed it to effect the transmission of shares as well as subsequent bonus shares in favour of the appellant. From these two cases involving leading companies like Finolex and Cipla, it is obvious that notwithstanding the clear legal position, managements of some companies tend to refuse transmission of shares due to extraneous considerations. Hence, investors would be well-advised to remember that while obtaining the succession certificate they should ensure that it covers the entire estate of the deceased and more particularly the shares and securities held by him at the time of his death.

    0       0 Comment Report
Get Notifications
Videos
Books
Notes
Loading
SIGN UP
Watch best faculty demo video classes

These top faculty video lectures will
help u prepare like nothing else can.