Brief: Transmission of shares occurs by operation of law, commonly after a shareholder’s death. It does not require Form SH-4 or attract share-transfer stamp duty because no instrument of transfer is executed. The claimant must instead establish the death and their entitlement to have the holding registered in their name. The documents and procedure depend on whether the shares are held physically or in demat form, whether a nomination exists, and whether the company is listed. A nominee may receive the securities through the transmission process, but registration as nominee does not necessarily settle the beneficial rights of the deceased holder’s legal heirs.
Stamp Duty on Transmission of Shares vs Transfer of Shares – Why No Duty Applies, What Documents the Company Asks For, and the Process
Short Answer
No share-transfer stamp duty is payable merely to transmit shares following a holder’s death. Section 56(1) of the Companies Act, 2013 expressly preserves a company’s power to register a person to whom the right to securities has been transmitted by operation of law. The claimant submits a transmission request and the applicable evidence of death and entitlement; Form SH-4 is used for a transfer, not a transmission.
Applicable Legal Provisions
- Companies Act, 2013, section 56(1), proviso: Preserves registration of a person entitled to securities by operation of law. Section 56(4)(c) sets the period for delivery of a certificate following receipt of an intimation of transmission, subject to the provision’s terms.
- Companies Act, 2013, section 72: Provides for nomination of securities. The nominee’s position must also be considered in light of the applicable succession law and judicial interpretation; nomination should not automatically be described as extinguishing every legal heir’s beneficial claim. See nomination of shares and rights of nominees.
- Articles of association: The company’s transmission provisions govern its recognition of the claimant and the evidence it may require. Table F in Schedule I supplies model provisions where applicable.
- Indian Stamp Act, 1899, section 3: Stamp duty is imposed on chargeable instruments. A transmission by operation of law does not itself involve an executed instrument of share transfer.
- SEBI requirements: For listed securities, the applicable SEBI framework prescribes the transmission request, documents and process. Its requirements must be checked separately from those of an unlisted company.
Why Share-Transfer Stamp Duty Does Not Apply
A voluntary transfer and a transmission have different legal bases. In a transfer, the holder disposes of securities in favour of another person through the applicable transfer process. In a transmission, entitlement arises by operation of law, and the company or depository records the claimant’s entitlement after examining supporting documents. The transmission request, death certificate and succession documents are evidence for that purpose; they are not Form SH-4 or an instrument executed by the deceased shareholder to transfer the shares.
This conclusion concerns share-transfer stamp duty on the transmission itself. A separately executed document, such as a release or family settlement, may have its own stamp duty consequences under the law applicable to that document.
Documents Required Instead of Form SH-4
| Situation | Documents to check |
|---|---|
| Surviving joint holder | Transmission request, death certificate and the identification or KYC documents required by the company, registrar or depository participant. |
| Registered nominee | Transmission request, death certificate, nomination recorded with the company or depository, and applicable identity and KYC documents. For physical holdings, the original certificate may be required. |
| Claimant under a Will | Transmission request, death certificate, Will and proof of entitlement. Probate or letters of administration may be necessary where the applicable law or circumstances require them; the company or registrar may require further evidence. |
| No nomination or Will | Transmission request, death certificate and appropriate proof of succession. Depending on the holding and applicable procedure, this may include a succession certificate, letters of administration, legal-heir evidence, no-objection documents or an indemnity. |
The precise list is not uniform. For listed securities, follow the current SEBI transmission framework and the registrar’s prescribed form. For demat holdings, submit the request through the depository participant; an original physical share certificate is not involved. For an unlisted company, check its articles and the facts of the claim. See also the TaxGuru discussion on succession certificates.
Process of Transmission of Shares
| Step | Action |
|---|---|
| 1 | Identify whether the holding is physical or in demat form, whether it is jointly held, and whether a valid nomination is recorded. |
| 2 | Submit the prescribed transmission request and death certificate to the company or registrar for physical securities, or to the depository participant for demat securities. |
| 3 | Provide the documents establishing the claimant’s entitlement under the applicable route. Resolve any competing claims before registration. |
| 4 | After verification and approval under the applicable procedure, the company updates its register for physical holdings or the securities are credited through the depository system for demat holdings. |
| 5 | Retain the request, supporting evidence, approval and updated holding records. No Form SH-4 or share-transfer stamp duty is required for the transmission itself. |
Practical Points
- Later sale: A subsequent sale or other voluntary transfer by the person who receives the shares is a separate transaction. Its transfer procedure and stamp duty treatment must be assessed independently. Form SH-4 applies to a relevant physical transfer; it is not the route for every sale of demat securities. See procedure for transfer of shares.
- Nominee and heirs: Transmission into a nominee’s name does not, by itself, conclusively resolve disputes about beneficial ownership under succession law.
- Multiple heirs: If the heirs seek registration in one person’s name, the company or registrar should examine the applicable succession evidence and any consent, release or settlement. A separate release or settlement should be reviewed for its own legal and stamp duty consequences.
- Income tax: Transmission on death should not be described simply as an exemption under section 47(iii), which addresses specified transfers including those under a gift or Will. For a later sale by an heir, examine section 49(1) for the previous owner’s cost and the applicable holding-period rules.
Conclusion
Transmission by operation of law does not require Form SH-4 and does not attract share-transfer stamp duty. The claimant must establish their entitlement using the documents required for the particular holding and transmission route. A later voluntary transfer, or a separate instrument executed among heirs, calls for its own stamp duty assessment.
FAQs
1. Is a Board resolution always required for transmission?
No universal requirement for a separate Board resolution should be assumed. A company must follow its articles and its authorised approval procedure. Listed physical holdings and demat holdings must also follow the applicable registrar or depository process.
2. What happens when one joint holder dies?
The surviving holder or holders ordinarily apply for transmission in their favour with the death certificate and prescribed documents, subject to the holding terms and applicable procedure.
Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES, Company Secretary in Practice, Delhi. Email: [email protected]
