The Securities and Exchange Board of India (Sebi) will shortly modify some rules pertaining to inheritance of shares, based on the recommendations of the committee on ‘Transmission of Shares’, a person involved with the development told ET.
The move is likely to benefit the legal heirs awaiting inheritance of shares belonging to deceased relatives who neither made a will nor filed the mandatory nomination with depositories.
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The new guidelines will pave the way for quick transmission of shares, especially physical shares. Brokers said investors residing away from urban centres have been facing maximum difficulties with respect to share inheritances.
Transmission means devolution of title to shares otherwise than by transfer, for example, devolution by death, succession, inheritance, bankruptcy, marriage, etc. Transmission is different from ‘transfer’; in transmission a person acquires an interest in the property by operation of law such as right of inheritance or succession, whereas transfer is effected by an act of the parties.
According to some people tracking the committee’s work, Sebi took about 16 months to move ahead on the report despite unanimity among committee members on addressing the difficulties in transmission of physical and dematerialised securities.
“In case of physical shares, companies would have to fix a threshold limit of 200 shares or Rs 1 lakh, whichever is higher, for transmission of shares after submitting the standardised documents,” said a person on the committee. “The limit will be the basic minimum limit to be adhered to by all listed companies.
Companies would require a deed of indemnity, an affidavit and a NoC in case there are other legal heirs. Those companies that have a higher threshold can continue with that,” he said. When the title to shares is passed by an operation of law, the beneficiary need not perform additional formalities.
Companies have different documentary compliances for the legal heirs of the deceased security holder. In many cases, this is tedious and discourages investors from following up on small amounts.
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For instance, in case of a leading bank, a local manager submits a verification report on whether the legal heir possesses a succession certificate or the probated will. Market participants familiar with the development point to the need for updating the nomination of lakhs of investors.
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Thursday, February 26, 2009
SEBI to simplify share inheritance rules
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