Understanding SEBI Transmission of Shares Under Indian Company Law

The transmission of shares is a critical aspect of corporate governance and investor rights in India. When a shareholder passes away or becomes legally incapacitated, their shares do not automatically transfer to another person without following a legal process. This is where SEBI transmission of shares comes into play. Understanding the rules and procedures under Indian company law ensures smooth ownership transfer while safeguarding the interests of shareholders and companies alike.

What is Transmission of Shares?

Transmission of shares refers to the transfer of ownership of shares from a deceased or incapacitated shareholder to their legal heirs or nominees. Unlike a regular sale or transfer of shares, which is voluntary, transmission is typically involuntary, triggered by events such as:

• Death of a shareholder

• Insolvency or bankruptcy

• Legal incapacity of the shareholder

• Court orders or government directives

The process ensures that the rightful heirs or nominees can claim ownership of shares without disputes, in compliance with SEBI regulations and the Companies Act, 2013.

Difference Between Transfer and Transmission of Shares

It is important to distinguish between transfer and transmission of shares:

Legal Framework Governing Transmission of Shares

The transmission of shares in India is governed by multiple legal provisions:

1. Companies Act, 2013

   • Section 56 of the Act deals with the transfer and transmission of shares.

   • It empowers companies to register the transmission of shares upon receipt of proper legal documents.

2. SEBI Regulations

   • SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 require listed companies to comply with strict disclosure norms during share transmission.

   • Ensures transparency in recording ownership changes and protecting shareholder rights.

3. Indian Succession Laws

   • The Indian Succession Act, 1925 governs the inheritance of shares if the shareholder dies intestate (without a will).

   • Nomination under the Companies Act or other applicable laws simplifies transmission for small shareholders.

Key Documents Required for SEBI Transmission of Shares

To successfully complete the transmission of shares, companies typically require:

1. Death certificate of the shareholder (in case of deceased shareholder)

2. Succession certificate or probate of will issued by a court

3. Nomination proof, if the shareholder had nominated someone under Section 72 of the Companies Act

4. Share certificates of the deceased shareholder

5. KYC documents of the legal heir or nominee (PAN, Aadhaar, address proof)

6. Transmission request form provided by the company

Companies may also require an affidavit or indemnity bond to safeguard against potential disputes.

Step-by-Step Process of SEBI Transmission of Shares

Understanding the transmission process helps ensure compliance and avoid unnecessary delays:

1. Intimation to the Company

The legal heir or nominee must notify the company about the death or incapacity of the shareholder. This includes submitting an application for transmission along with the required documents.

2. Verification of Documents

The company verifies the authenticity of submitted documents such as death certificate, succession certificate, or nominee details. Companies listed on stock exchanges must ensure SEBI compliance in recording the ownership change.

3. Approval by Board of Directors

Once the documents are verified, the Board of Directors approves the transmission request. For listed companies, this step may include updating the Registrar and Share Transfer Agent (RTA) records.

4. Issuance of New Share Certificate

After approval, the company issues a new share certificate in the name of the legal heir or nominee. This formally completes the transmission process and updates the company’s register of members.

5. Updating SEBI Records

For listed companies, the new ownership must be updated in SEBI-compliant systems to ensure transparency and prevent discrepancies in shareholding records.

Importance of Nomination in SEBI Transmission of Shares

Nomination under Section 72 of the Companies Act, 2013 significantly simplifies the transmission process:

• Nominee automatically receives shares upon the death of the shareholder.

• Reduces the need for court proceedings or succession certificates.

• Protects shares from unnecessary legal disputes among heirs.

However, if there is no nomination, legal heirs must obtain a succession certificate or probate of will, which may take longer and involve court intervention.

Common Challenges in Transmission of Shares

Despite clear legal provisions, the process of SEBI transmission of shares may face challenges:

1. Incomplete Documentation – Missing certificates or KYC documents can delay transmission.

2. Disputes Among Heirs – Multiple claimants without a clear succession plan can lead to legal battles.

3. Company Delays – Some companies take longer to verify documents and update records.

4. Nomination Conflicts – Discrepancies between nomination details and legal heirs can cause disputes.

To overcome these issues, it is crucial to maintain updated records, nominate beneficiaries, and comply with SEBI and Companies Act regulations.

Role of SEBI in Transmission of Shares

SEBI ensures:

• Transparent recording of share transfers and transmissions for listed companies.

• Protection of investor rights by mandating accurate updates in the register of members.

• Compliance with disclosure requirements, preventing fraud or misappropriation during transmission.

Conclusion

The SEBI transmission of shares is an essential process under Indian company law to ensure legal heirs or nominees inherit shares without disputes. By understanding the legal framework, required documents, and step-by-step procedures, shareholders can ensure smooth transmission while complying with both SEBI regulations and the Companies Act. Nomination plays a vital role in simplifying the process and avoiding delays or legal conflicts. Companies and investors must work together to maintain transparency and uphold shareholder rights during the transmission of shares.

---

FAQ Section

Q1: What is SEBI transmission of shares?
A1: SEBI transmission of shares refers to the legal process of transferring ownership of shares from a deceased or incapacitated shareholder to their legal heirs or nominee, ensuring compliance with SEBI regulations.

Q2: How is transmission different from transfer of shares?
A2: Transmission is involuntary (due to death or incapacity) and initiated by heirs or nominees, while transfer is voluntary and initiated by the shareholder through a transfer deed.

Q3: What documents are required for share transmission?
A3: Key documents include the death certificate, succession certificate or probate, share certificates, nominee proof, KYC documents, and a transmission request form.

Q4: Does nomination simplify the transmission process?
A4: Yes, nomination under Section 72 of the Companies Act allows the nominee to directly receive shares, reducing the need for court proceedings and delays.

Q5: How long does SEBI transmission of shares take?
A5: The process typically takes 2–6 weeks, depending on document verification, company compliance procedures, and whether court intervention is required.

Q6: Can disputes arise among heirs during transmission?
A6: Yes, disputes may occur if multiple heirs exist or if nomination details conflict with legal heirs. Proper documentation and legal compliance minimize such issues.

Q7: Who approves the transmission of shares in a company?
A7: The Board of Directors approves the transmission after verifying documents, and listed companies must also update SEBI-compliant records through their Registrar and Share Transfer Agent (RTA).