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Functions of DP- Transmission & Nomination

Functions of DP- Transmission & Nomination

Functions of DP- Transmission & Nomination (Part 1)

  • Transmission of Securities: Refers to the devolution (transfer) of title to securities, for example, in case of death of individual, lunacy, bankruptcy, winding-up (in case of corporate entity) etc. The person on whom the securities devolve has to prove his entitlement to claim the securities by submitting appropriate documents and seek transmission.
  • Procedure for Transmission: If the securities are held in the depository system (electronic form), the documents have to be submitted to the Depository Participant (DP). If the securities are held in physical form, the documents have to be sent to the company for effecting transmission.
  • Nomination for Securities: The Companies Act 2013 provides for nomination in respect of shares, debentures, etc. Under the provisions, a shareholder, a debenture-holder, a bondholder can nominate one person(s), in whom the shares or debentures or bond or deposits would vest, in the event of original investor's death.
  • Nomination in Dematerialised Form: Investors holding securities in dematerialised form have the option of nominating up to 10 persons in the account, who would be entitled to receive securities outstanding in his/her name in the event of their death.
  • Key Points for Nomination:
    • Nomination facility can be availed of by any person whether resident Indian or a non-resident Indian investor.
    • Nomination can be changed at will by resubmitting the nomination details in the prescribed form.
    • The DP has to capture and update the nominee details submitted by the account holder in the depository system.
    • In the event of death of the account holder, the securities lying to the credit of the account holder in the demat account may be transmitted to the nominee's account after the DP verifies the identity of the nominee.
  • Transmission of Securities with Nomination: The Client(s) may provide nomination for his/their account in favour of any person(s) (Maximum 10 nominees), by filing with the relevant Participant.
  • Requirements for Valid Nomination:
    • It is submitted to the Participant by the rightful Client(s).
    • It is in the prescribed format.
    • It is duly signed by Client(s).
    • It is properly signed and witnessed.
    • Signature of the Client(s) tally with the specimen signature records.
    • The details of the securities entered in the nomination forms match those in the records of the Participant.
  • Transmission Procedure: Upon the death of the sole holder or the death of all the joint holders, as the case may be, the nominee(s) shall request the DP in writing along with an original death certificate or a copy of the death certificate duly attested by the nominees or by a Public Notary or by a Gazetted Officer and self-attested copy of the Permanent Account Number (PAN) card of the nominee(s) issued by the Income Tax Department for transmitting the securities covered by the nomination to the account of the Nominee.

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Functions of DP- Transmission & Nomination (Part 2)

  • Transmission of Securities: Regulated entities shall facilitate the transfer of assets from the nominee(s) to the legal heir(s) of an investor, as and when approached by either party.
  • Documentation for Transmission: The following documents are required for transmission:
    • Original or a copy of the death certificate, duly attested by the legal heir(s) / claimant(s)
    • Self-attested copy of the Permanent Account Number (PAN) card of the legal heirs / claimant(s)
    • A copy of the Succession Certificate or Probate of Will or Will or Letter of Administration or court decree or Legal Heirship Certificate
  • Transmission of Securities held singly in the Depository without nomination: The legal heir(s) or claimants of the deceased account holder have to submit a request to the DP for transmitting the balances lying in the BO account of the deceased to their BO account(s).
  • Transmission of Securities held jointly in the Depository: In case of death of one of the Clients in a joint account, the surviving Client(s) shall request the DP to transmit the balances lying in the Client account to the account of the surviving Client(s).
  • Transmission of Securities held by Karta of Hindu Undivided Family (HUF) in the Depository: Upon death of the Karta of a Hindu Undivided Family (HUF), the surviving member(s) of the HUF may appoint the eldest surviving member of the HUF as the new Karta of the HUF or a coparcener who is appointed as Karta by an agreement reached amongst all the existing coparceners of the HUF.
  • Key Requirements:
    • Death Certificate: Original or a copy of the death certificate, duly attested by the legal heir(s) / claimant(s)
    • PAN Card: Self-attested copy of the PAN card of the legal heirs / claimant(s)
    • Succession Certificate: A copy of the Succession Certificate or Probate of Will or Will or Letter of Administration or court decree or Legal Heirship Certificate
    • Indemnity Bond: A notarized indemnity bond from the legal heir(s) / claimant(s) to whom the securities are transmitted
    • No Objection Certificate: No Objection Certificate(s) from all the legal heir(s) who do not object to such transmission
  • Special Cases:
    • HUF Partition: In case of partial or total partition of the HUF, the securities shall be divided amongst all the members in the manner specified by the applicant.
    • Karta Change: In case of death of the Karta of HUF, the name of the deceased Karta in the Beneficial Owner (BO) account shall be replaced by the new Karta appointed by the members of the HUF.

Functions of DP- Transmission & Nomination (Part 3)

  • Transmission Process: In cases where shares are transferred to members seeking partition, the transfer can be done amicably or through a court direction if an agreement cannot be reached.
  • Centralized Mechanism for Reporting Demise: SEBI introduced a centralized mechanism for reporting and verifying the demise of an investor, effective January 1, 2024, to smoothen the transmission process.
  • Key Players:
    • KRA (Key Registration Authority): Enables listed companies to provide beneficial access to investors holding securities in physical form.
    • RTAs (Registrar and Transfer Agents): Facilitate connectivity with KRA for listed companies.
    • Intermediary: Verifies the death certificate and updates records in the KRA system.
  • Obligations of Intermediary:
    • Verification of Death Certificate: Within one day of receipt, through online or offline (OSV) processes.
    • Record and Retain Documents: Self-certified copy of proof of identity, relationship with the deceased, and contact details of the notifier.
    • Update KRA System: Submit a KYC modification request and upload relevant documents on the same day as verification.
    • Block Debit Transactions: In the account/folios of the deceased investor.
  • Intimation on Transmission of Assets:
    • Notification from KRA: Upon receipt of "Blocked Permanently" notification, intermediaries block debit transactions and intimate the notifier/nominee about transmission procedures within 5 days.
    • Transaction Request in "On Hold" Accounts: Allow transactions after additional due diligence, such as video calls or In-Person Verification (IPV), to establish the investor is alive.
  • Other Obligations:
    • Reversal of Incorrect Demise Information: Submit a KYC modification request and upload a report of additional due diligence to the KRA if the demise information is proven incorrect.
    • Data Submission to SEBI: Intermediaries submit data on intimation of transmission and its outcome to SEBI in a prescribed format.
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