Padmanabh Merchant
Nomination of Securities:
Introduction:
For the purpose of protecting the interest of the investors in shares and debentures, –
(i) Section 109A of the erstwhile Companies Act, 1956 relating to Nomination of Shares and
(ii) Section 109B of the erstwhile Companies Act, 1956 relating to Transmission of Shares,
were inserted by the Companies (Amendment) Act, 2000 with effect from December 13, 2000, possibly on the representation of Bombay Shareholders’ Association to the then Ministry of Corporate Affairs.
In order to remove the difficulties faced by the legal heirs of deceased shareholders and debenture holders, provisions for nomination facility were introduced in the then Companies Act, 1956.The scope of the aforesaid provision of Nomination in Section 109A of the erstwhile Companies Act, 1956 was widened in Section 72 of the Companies Act, 2013 to include all the securities, instead of only shares and debentures.
Any security holder of a Company may nominate a person as a nominee, per Form No. SH.13, in whom the securities would vest in the event of his / her death. The property in the securities gets vested in favour of the nominee without following the cumbersome and time-consuming procedures after the death of the security holder.
Specimen extract of the Board Minutes of a Private Limited Company for taking on record Nomination of share(s) held by its Shareholder is given below.
06/31-01-2023/ST-APPOINTMENT OF A NOMINEE IN RESPECT OF SHARES OF THE COMPANY:
The Chairman placed before the Board Nomination Form dated January 19, 2023 of Mr. ABC, one of the Members of the Company, in prescribed Form No. SH – 13, in respect of 1 Equity Share of Rs. 100/-, fully paid up, of the Company, held in the name of said Mr. ABC (Folio No. 2 in Register of Members of the Company). The Chairman stated that consequent upon the said Nomination being taken on record of the Company, all the rights in respect of the aforesaid 1 Equity Share of the Company would vest in favour of
the nominee, pursuant to Rule 19 of the Companies (Share Capital and Debentures) Rules, 2014, in the event of the death of the said Mr. ABC, being the one of the Members of the Company.
After discussion, the Board passed the following Resolution unanimously:
“RESOLVED THAT prescribed Nomination Form SH – 13 pursuant to Section 72 of the Companies Act, 2013 and Rule 19(1) of the Companies (Share Capital and Debentures) Rules, 2014, duly filled in and signed by Mr. .ABC, being one of the Members of the Company, namely, XYZ Private Limited (Folio No. 2 in the Register of Members of the Company), nominating Mrs. PQR, being the adult / married daughter of the said Mr. ABC, in respect of 1 Equity Share of Rs. 100/-, fully paid – up, of the Company, held in the name of the said Mr. ABC, and placed before the Board, be and is hereby approved”
“RESOLVED FURTHER THAT in compliance of Sub-Rules (2) and (4) of Rule 19 of the Companies (Share Capital and Debentures) Rules, 2014, a corresponding entry in respect of the aforesaid approved Nomination Form be made in Folio No. 2 of the Register of Members, maintained by the Company pursuant to Section 88 (1) (a) of the Companies Act, 2013 and Rule 3(1) of the Companies (Management and Administration) Rules, 2014 AND THAT the said Shareholder of the Company be intimated accordingly AND THAT a Certified True Copy of this Board Resolution be furnished to the concerned authority for information and necessary action, if any”
Transmission of Shares:
According to the provisions of Sub – Section (5) of Section 56 of the Companies Act, 2013 on the death of the Security holder, the nominee may –
either
elect to register himself / herself as a security holder
or
transfer of the securities as if he / she is the original security holder.
Thus, a legal representative of the deceased security holder can transfer any security or interest therein owned by a deceased security holder, even though the legal representative himself / herself is not a holder of the said security or interest therein.
In case the nominee elects to become a registered security holder, such nominee is required to send a notice to the Company together with the death certification of the deceased investor.
The Board of Directors of the Company is required to serve a notice to exercise the option of becoming a member of the Company or transfer the security within a period of ninety days.
Specimen extract of the Board Minutes for taking on record Transmission of share(s) held by a Member / Shareholder of its Private Limited Company is given below.
06/31-01-2023/XX-TRANSMISSION OF SHARES OF THE COMPANY:
The Chairman placed before the Board –
(1) an Application dated January 20, 2023 of Mr. XYZ, one of the Members / Shareholders of the Company for Transmission of 25 Equity Shares of Rs. 100/- each, fully paid up, of the Company held in the name of his deceased son, Mr. PQR, one of the Members / Shareholders of the Company;
(2) duly attested Death Certificate of the said Mr. PQR,
(3) a Share Certificate in respect of 25 Equity Shares of the Company, held in the name of the said Mr. PQR; and requisite Indemnity Bond, Affidavit; and
(4) No Objection Certificates, etc. in lieu of Succession Certificate.
The Chairman suggested waiver of the requirement of Succession Certificate generally required for Transmission of Shares of a Company.
After discussion, the Board passed following Resolution unanimously:
“RESOLVED THAT following documents placed before the Board Meeting of the Company, namely, ABC Private Limited,–
(1) an Application dated January 20, 2023 of Mr. XYZ, one of the Members / Shareholders of the Company (Folio No. 16 in the Register of Members), for Transmission of 25 Equity Shares of the
(2) Face Value of Rs. 100/- each, fully paid up, (Share Certificate No. 19 dated January 11, 1993; Distinctive Numbers from 10415 to 10913, both inclusive) of the Company, held in the name of Mr. PQR, the deceased Member / Shareholder of the Company (Folio No. 7 in the Register of Members) and son of Mr. XYZ, the said Applicant Member of the Company;
(3) one Original Share Certificate No. 19 dated January 11, 1993 in respect of the said 25 Equity Shares of the Company, held in the name of the said deceased Member of the Company;
(4) duly attested Death Certificate of the said deceased Shareholder of the Company
(5) duly signed and notarised Indemnity Bond dated January 20, 2023 issued by the said Applicant Shareholder of the Company, for Transmission of Shares, without producing Probate / Succession Certificate / Letter of Administration;
(6) duly signed and notarised Affidavit dated January 20, 2023 issued by the said XYZ / Applicant Shareholder of the Company, for Transmission of Shares, without producing Probate / Succession Certificate / Letter of Administration;
(7) No Objection Certificate from either of two legal heirs of the said deceased Shareholder of the Company (not claiming the rights in the said Shares of the Company, held in the name of the deceased Shareholder); and
(8) Proof of identification of the said Applicant Shareholder of the Company
being found to be in order and acceptable for the Transmission of the said 25 Equity Shares of the Company in favour of the said Applicant Shareholder of the Company, be and are hereby approved pursuant to the provisions of Section 56(5) of the Companies Act, 2013 read with Articles 16 and 17 of the Articles of Association of the Company”
“RESOLVED FURTHER THAT the production of Succession Certificate, Probate or Will or any additional legal representation in respect of the said Transmission of the Shares of the Company be and is hereby dispensed with / waived”
“RESOLVED FURTHER THAT the Transmission of the said 25 Equity Shares of the Company, held in the name of the said deceased Shareholder, Mr. PQR be and is hereby allowed in favour of the said Applicant Shareholder, Mr. XYZ, as the Legal Representative of the said deceased Shareholder”
“RESOLVED FURTHER THAT either of two Directors of the Company be and is authorised to arrange for the–
(1) return of the aforesaid Share Certificate, bearing an endorsement in respect of the aforesaid Transmission of 25 Equity Shares of the Company, to the Applicant Shareholder of the Company;
(2) suitable entries in the Statutory Register of Members, Register Share Transfers / Transmission, etc., maintained by the Company; and
(3) submission of Certified True Copies of this Board Resolution to the concerned persons / authorities and do all further acts, deeds, and things, as may be considered necessary for effecting such Transmission of the Shares of the Company”
Conclusion:
Author of the article has tried to help persons doing Company Secretarial Work of Private Limited Companies to understand two topics of
(a) Nomination of Securities under Section 72 of the Companies Act, 2013; and
(b) Transmission of Securities under Section 56(2) of the Companies Act, 2013.
Committee of Secretarial Standards, vide Section 118 of the Companies Act, 2013, could consider providing templates of Board Minutes on the aforesaid two topics of –
(a) Nomination of Securities; and
(b) Transmission of Securities.
Author Bio
I am the first share holder in HDFC joint with my mother. Can I nominate my daughters for my shares without signature of my mother. Reason my mother is no more and I do not have her death certificate.