How To Transfer Shares After Death?

When a person who holds shares in a company passes away, their shares do not automatically transfer to the heirs. The legal process for transferring shares after death involves several steps, including providing proof of the deceased’s death, establishing the rights of the heirs, and following the company's procedures for share transmission. The process may vary slightly depending on whether the shares are held in physical or dematerialized form.

Steps to Transfer Shares After Death:

Obtain the Death Certificate:

The first step is to acquire an official death certificate of the deceased individual. This serves as the primary proof of death for initiating the transfer process.

Determine the Legal Heirs:

If the deceased person had a will, the legal heirs or beneficiaries are typically outlined in the document. If there was no will, the legal heirs (spouse, children, parents, etc.) can be determined according to intestate succession laws.

Legal heirs may need to provide a succession certificate or letter of administration to establish their right to inherit the shares, especially if no will exists.

Check if Shares Are Held in Demat Form or Physical Form:

Demat Shares:

If the shares are held in a dematerialized form (electronic shares), the transfer process is simpler and involves updating the records with the Depository Participant (DP).

Physical Shares:

If the shares are in physical form (certificates), the heir must submit the original share certificate along with the necessary documents for the transfer.

Submit the Required Documents to the Company or Registrar:

The following documents are typically required to transfer shares after death:

• Death certificate of the deceased
• Proof of identity and address of the legal heir(s)
• Succession certificate or letter of administration (if no will is available)
• Share transfer form (signed by the legal heir)
• Original share certificates (in case of physical shares)
• Any other documents as required by the company or registrar

Transmission Request Form:

For shares in demat form, the legal heir must fill out a Transmission Request Form (TRF) and submit it to the respective depository participant (DP), along with the necessary documents.

For physical shares, the heir needs to submit the transfer form (with a stamp duty) to the company’s registrar.

Company’s Approval for Transfer:

Once the documents are submitted, the company or registrar will verify the legal heirs' entitlement to the shares. If everything is in order, the company will transfer the shares to the legal heir’s name.

If the transfer involves a substantial number of shares or if there is any dispute, the company may request additional documentation or legal clarification.

Receiving the Shares:

Upon successful transfer, the shares will be credited to the heir’s demat account (for demat shares) or the company will issue new share certificates in the name of the heir (for physical shares).

Tax Implications:

The transfer of shares after death is typically not subject to capital gains tax. However, if the shares are sold by the heirs later, capital gains tax may be applicable based on the holding period and the value at the time of sale.

Legal Actions and Protections:

Succession Certificate:

In cases where the deceased has not left a will, a succession certificate is required to prove the heir's entitlement to the shares.

Family Disputes:

If there is a dispute between the heirs over the shares, it may be necessary to go to court to resolve the issue. A legal heirship certificate may be required in such cases.

Will and Probate:

If the deceased had a will, the probate court must validate the will before any transfer of shares can take place.

Example:

If a man named Arvind passes away, leaving shares in his name in a listed company, and he has two children, Rahul and Neha, who are the legal heirs, the process for transferring the shares will be as follows:

• Rahul and Neha obtain the death certificate of Arvind and apply for a succession certificate (if there is no will).
• They will then submit the required documents, including the Transmission Request Form (for demat shares) or the share transfer form (for physical shares), to the company or registrar.
• Once the company verifies the documents and confirms their entitlement, the shares will be transferred to Rahul and Neha’s names, either in their demat accounts or through new share certificates.