When a shareholder dies, the fate of their shares raises important legal questions. Do they pass to the nominee? Must all legal heirs apply together? Can the company itself update the ownership? The answer lies in understanding share transmission- a legal process distinct from voluntary transfer.
What Is Share Transmission?
- Share Transfer happens when a shareholder voluntarily sells or gifts their shares.
- Share Transmission, however, occurs without the shareholder’s consent, due to events like death, insolvency, or mental incapacity.
This process does not occur automatically. It requires formal updating of the company’s records in the name of the rightful claimant.
Legal Framework
Share transmission is governed by:
- Section 56 of the Companies Act, 2013,
- The company’s Articles of Association, and
- SEBI/NSDL circulars and depository rules.
Under Section 56(2):
The company retains the authority to register the transmission of securities by operation of law.
In practical terms, when a shareholder dies, legal heirs or nominees must submit succession documents to formally update ownership with the company.
Documents Required for Transmission
The required paperwork depends on whether a nominee exists:
Nominee Present
- Transmission Request Form (TRF)
- Death certificate
- Nominee’s PAN, KYC, and client master report
- Nominee acts as a procedural placeholder—not necessarily the final owner
No Nominee (Legal Heirs Apply)
- TRF and death certificate
- PAN and KYC of all heirs
- Notarized affidavit, succession proof (Will/probate, legal heir certificate)
- Indemnity bond and NOC from other heirs
SEBI’s May 18, 2022 circular also allows simplified transmission for holdings up to ₹5 lakh (physical) or ₹15 lakh (demat) with minimal documentation.
Why Transmission Matters?
Without transmission:
- No dividend,
- No voting rights, and
- No ability to sell shares.
Transmission ensures that:
- Legal ownership is formally recognized,
- Company records are updated, and
- Ownership disputes are avoided.
Nominee vs Legal Heir: Supreme Court Clarity
The landmark decision in Shakti Yezdani v. Jayanad Jayant Salgaonkar (2023) clarified:
Nomination under the Companies Act provides only a procedural discharge- not ownership.
- Final ownership is decided by succession law, not nomination.
For example, a father may nominate his son but leave the shares to his daughter in a Will. In such cases, the daughter becomes the legal owner, not the nominee.
Joint Holders: Survivorship Rule Applies
If the deceased was a joint shareholder, the shares pass automatically to surviving holders under:
- Section 56(2) & (4)(c) of the Companies Act, 2013,
- SEBI circular dated May 18, 2022, and
- NSDL Rule 12.6.1.
Surviving holders need only submit the TRF, death certificate, and KYC—no succession documents required unless Articles of Association specify otherwise.
Physical vs Demat Shares: Transmission-cum-Demat
For physical share certificates:
- Submit the usual documentation (TRF, death certificate, etc.),
- Request transmission-cum-demat,
- Convert shares to demat format and remove the deceased’s name in a single step.
This approach is supported by NSDL and simplifies the process.
Post-Transmission Rights
Once transmission completes, the new registered holder (either legal heir or nominee):
- Gains voting rights,
- Starts receiving dividends, and
- Can sell or transfer the shares.
However, if a nominee’s claim is legally challenged, courts may redirect ownership to rightful heirs.
Unclaimed Shares & IEPF Reclamation
Shares or dividends unclaimed for seven years transfer to the Investor Education and Protection Fund (IEPF). Legal heirs or nominees can reclaim them by:
- Completing share transmission,
- Filing Form IEPF-5,
- Submitting documents and indemnity bonds, and
- Receiving them back within 60 days into their demat account.
Final Checklist for Shareholders and Heirs
- Confirm if a nominee is registered in demat or physical folio.
- Ensure PAN, KYC, bank, and other details are current.
- Prepare succession documents (Will, heirship certificates).
- Educate heirs on the transmission procedure.
- Track IEPF for any unclaimed dividends or shares.