What to do when a shareholder dies

When a holder of shares, bonds, debentures or mutual fund units dies, the securities do not vanish and they do not have to be sold. They have to be moved into the names of whoever is entitled. That process is transmission, and no registrar or depository will do it on a death certificate alone.

The reason families find it hard is that India gives several different answers to the question of who inherits, and the registrar's requirements change with which answer applies and with how much the holding is worth.

Find the whole estate before you start anything

Most families begin with the two holdings they know about, and that is the single most expensive mistake available here. Each transmission needs a document set, and a document set assembled once for the largest holding in the estate will serve every other holding in it. Assembled piecemeal, the same affidavits and succession documents are obtained three times.

So look first: consolidated account statements from both depositories, a mutual fund search across the registrars, old certificates and dividend warrants, bank statements showing credits from companies, insurance premium debits, and the IEPF records. Then decide how to proceed.

Which route the estate runs on

• A surviving joint holder. The lightest case by a distance. The survivor is ordinarily recognised on the death certificate and the prescribed request. If your parents held jointly, deal with this first and everything afterwards is one person's paperwork.
• A nomination on the folio. Also comparatively simple. The institution hands the holding to the nominee, and that closes the registrar's question.
• A will. Depending on where the deceased lived and where the property is, the will may need probate before a registrar will act on it.
• None of the above. Intestate succession, governed by the law applicable to the family, and the registrar will ask for a succession certificate, or a legal heirship certificate with no objection from the other heirs, depending on the value.

The thing families most often get wrong about nomination

A nomination decides who the institution pays. It does not decide who owns the holding as against the heirs. That distinction has generated a great deal of litigation, and it is academic in most families because the nominee and the heir are the same person.

Where they are not, it matters enormously, and it is far better dealt with at the start than discovered after the shares have been sold. If your late father nominated one sibling and the will provides for three, that is a conversation the family should have before anything is lodged.

A nominee receives. An heir owns. The registrar only asks the first question, which is why the second one has to be asked at home.

Value thresholds, and why they decide the cost

What a registrar will accept from an heir changes with the value of the holding, and the threshold for physical securities is not the same as for holdings in demat form. Below the applicable threshold, an affidavit, an indemnity bond and no objection from the other heirs will ordinarily do. Above it, a succession certificate becomes the realistic route, and that is a court process with a court's timeline and cost.

It is worth establishing which side of the line an estate falls on before assuming the worst. A family that goes to court for a succession certificate it did not need has spent months and a good deal of money unnecessarily.

The seven year problem

Dividends unclaimed for seven consecutive years take the shares into the Investor Education and Protection Fund. A holding left in a deceased name since, say, 2015 has very likely moved, and that changes the work: the claim is made to the Authority rather than to the company, and the Authority requires the succession position settled before it will release anything.

This is a strong argument for dealing with an estate's securities early even when the family has no intention of selling. A transmission done now is paperwork. The same holding left for a decade is a transmission and an IEPF claim, and often a second death to deal with as well.

What does not move by itself

Two things get left behind even by families who complete the transmission. Dividends, interest and redemption proceeds that accrued between the death and the transmission do not automatically follow the shares. Neither do entitlements from bonus issues, splits and rights offers that fell in the same period. Both have to be asked for.

When this is not paperwork

Everything above assumes the family agrees who is entitled and needs help proving it. Where the heirs genuinely disagree, this is a succession dispute rather than a transmission. It is decided by a court, each side needs its own representation, and no registrar will adjudicate between them. Recognising which of the two situations you are in, early, saves more money than any other decision in this area.