A perfect Diwali bonanza for Investor who is finding it difficult due to cumbersome and ambiguous process to transfer their Old physical shares
If you are facing the followings issues in the process of Transfer of physical shares then there is sigh of relief to lakhs of investors by Securities Exchange Board of India (SEBI)
• Not having PAN card of the Transferor of Share?
• Issues relating to Mismatch of name in PAN card vis-à-vis name on share certificate/ transfer deed?
• Major mismatch / Non-availability of transferor's signature?
What was the Issue?
SEBI received lot of representations, highlighting difficulties faced by transferees in providing documents for effecting transfer of securities and the documents sought vary across RTAs (Registrar & Transfer Agent) for cases relating to transfer of old shares in physical form where PAN card of transferor not available, name mismatch, signature mismatch etc.
Welcome gesture by SEBI : Setting up of Standardized Norms for transfer of Securities in physical mode
SEBI vide its circular dated 6th November have tried clarify various issues / difficulties being faced by investor to effect transfer of their securities in physical mode. This circular is issued under Regulation 101 and 102 of LODR to address the difficulties faced by investors in transfer of physical shares.
Let's glance through these standardized norms for transfer of Securities in physical mode
1. Non-availability of PAN of the transferor for transfer deeds:
• Transfer deeds executed prior to December 01, 2015: It has been clarified by SEBI that transfer deeds executed prior to notification of LODR (i.e., December 01, 2015) may be registered with or without the PAN of the transferor as per the requirement of quoting PAN under the applicable Income Tax Rules.
In other words, any transfer deed executed after December 01, 2005 need to have PAN number of the transferor for effective transfer
2. Mismatch of name in PAN card vis-à-vis name on share certificate/ transfer deed:
Investors have been facing issues relating to mismatch in name due to marriage, name change etc. In such cases, transfer shall be registered on submission of any of the four following additional documents explaining the difference in names:
• Copy of Aadhaar Card
• Copy of legally recognized Marriage Certificate
• Copy of gazette notification regarding change in name
• Copy of Passport
3. Major mismatch / Non-availability of transferor's signature:
There are multiple cases where the transferor did not take efforts to update his signature since he had already received the consideration for the transfer. Further, in many cases, the transferors could not be tracednow.
To address this major issue where the buyer felt stranded, SEBI laid down the following procedure / documentation for registration of transfer of securities, in such cases:
i. RTA/ company shall follow the procedure as laid down in Para (B)(2) of Schedule VII of LODR for major difference or non- availability of signature of the transferor(s). The brief procedure in such case is:
the transferor is required to update his/ her signature by submitting bank attested signature along with an affidavit, cancelled cheque to the RTA/company and contact details of the transferor
ii. Issuers / RTAs shall make efforts to contact the transferor by tracking dividend history / by contacting bank, KRAs and depositories. Issues / RTA shall try contacting the transferor by
1. checking the Dividend history and obtaining the current contact details from the bank where dividend was encashed.
2. from the address, email ids and phone numbers, if any, available with the Depositories/KRA
iii. Many a times the transferor does not co-operates the buyer. In case of non- delivery of the objection memo to the transferor or non-cooperation by / inability of the transferor to provide the required details to the transferee, company / RTA shall register the transfer after following the procedure asunder:
1. Following additional documents shall be collected from the transferee:
• Copy of address proof - Passport / Aadhaar Card / Driving License of the transferee.
• An indemnity bond from the transferee in the format prescribed by SEBI
• An undertaking that the transferee will not transfer/ demat the physical securities until the lock-in Period. These securities shall be under lock-in for a period of 6 months from the date of registration of transfer. The securities so transferred shall bear a stamp affixed by the company / RTA stating that these securities shall be under lock-in. RTA may also verify the documents submitted by the transferee with the KYC details, if any, available with the Depositories/KRAs.
2. Companies / RTAs shall publish an advertisement in at least one English language national daily newspaper having nationwide circulation and in one regional language daily newspaper published in the place of registered office of the listed entity is situated, giving notice of the proposed transfer and seeking objection, if any, to the same within a period of 30 days from the date of advertisement. A copy of the advertisement shall also be published on the company's website.
3. Transfer shall be effected only after the expiry of 30 days from the newspaper advertisement.
4. Names of the transferor, transferee and no. of securities transferred under this procedure shall be disclosed on the company's website for a period of 6 months from the date of transfer. This information shall also be displayed on stock exchange website as a corporate announcement;
Even in case of non-availability of any document required for transfer and the transferor is not cooperating or not traceable, companies/ RTA shall register the transfer by following the procedure as specified in case of major mismatch / non-availability of transferor's signature.
LODR regulation also require that the transfer shall be registered only if the address of the transferor submitted in the bank attestation matches with the address recorded in the records of the company / RTA. However, many a times the address as available with the company, as per old records, may not match with the current address attested by the bank and this has resulted in rejection of transfer requests causing undue hardship to investors. A welcome move by SEBI to make this hassle simple. In such case where the bank attested address of the transferor differs from the records available with the company / RTA, companies/ RTAs shall register the transfer by updating the new address as attested by the bank.
SEBI circular of 6th Nov is a light at the end of the tunnel but 5th December timeline is haunting badly
Though the recent circular is soothing the wound of lakhs of investor by simplifying the norms to for transfer of securities in physical mode but December 5th deadline to covert physical shares into demat is potentially acting as threat to heal the wound. If there is no extension beyond 5th December then there will not be any relevancy of this circular as the investor will not be able to get their transfer of shares in less than 30 days' time.
Let's hope to get extension of 5th December timeline.
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