No more lost in transmission
LIFE MADE EASY
ARNAV PANDYA
Transmission of securities, including shares in demat as well as
physical form, often leads to hassles for the nominee or sometimes
even the joint account holder. Now there is relief on this front, as
the Securities and Exchange Board of India ( Sebi) has simplified the
procedural work for investors. There are various conditions that need
to be followed at the time of transmission of shares and a careful
look at the details shows that proper understanding is essential.
Transmission of shares refers to a situation wherein on the death of
the shareholder these are transferred to the account of the joint
holder or the nominee or the legal heir. This refers to a situation
specifically on the death of the shareholder, so the conditions for
implementation are clearly outlined.
Demat form
If the shares are held in demat mode in a single holder's name without
a nominee, then the question arises as to who would these be
transferred to and the procedure involved. Currently, if the value of
shares is less than ₹ 1 lakh per account, then there is a simplified
procedure that has to be followed for transmission. The change that
has occurred is that Sebi has raised the limit to ₹ 5 lakh. This means
there will be a lot more cases wherein the transmission process would
be covered under these regulations but the figure here covers the
value of shares in the account and not holding in a single company.
A simplified procedure can be followed if there is no nomination and
in such a situation, the legal heir( s) would have to make an
application to the depository participant in the specified
transmission form, along with certain documents.
The first is a copy of the death certificate, duly notarised. The
second is a copy of the succession certificate, duly notarised, or the
order of a court of competent authority where the deceased has not
left a will. A third document can also be submitted, which is a copy
of the probate or letter of administration, duly notarised.
In case the succession copy or the probate cannot be produced, then
the legal heir would have to produce some additional documents. This
would include ( a) A letter of indemnity, duly supported by guarantee
of an independent surety made on appropriate non- judicial stamp paper
( b) An affidavit made on appropriate non- judicial stamp paper ( c) A
no- objection certificate from all the other legal heirs who do not
object to the transmission.
If the required documents are present, the process can be completed
quickly and now with a higher ₹ 5lakh limit, this would be applicable
to alarger pool of investors.
Physical form
When it comes to a physical holding in a single holders name, with or
without a nominee, of value not more than ₹ 2 lakh per company form
signed by the nominee above some additional documents may be sought,
such as an and claim of legal ownership certificate from the other
non- judicial stamp paper. In case the value of shares is more than ₹
2 lakh then the additional documents would include a succession
certificate or a probate of will or letter of administration or court
decree.
Here also the procedure is not too long as the list of documents is
clearly laid out. If the overall limit is higher then a larger number
of transactions would fall under the simplified procedure. An element
that would need to be considered is that in the physical process for
applying the ₹ 2 lakh limit, the value is to be considered per issuer
company and not for the portfolio of the investor as a whole. This
makes a huge difference as the overall portfolio could be higher but
if the individual holding is lower then the simplified conditions
would apply. This value would be calculated on the date of the
application; so that has to be kept in consideration, too.
Transmission of shares refers to a situation wherein on the death of
the shareholder, these are transferred to the account of the joint
holder or the nominee or the legal heir FOR INVESTORS
|Transmission is the transfer of shares after the death of the
existing holder |Demat shares in a single name without a nominee will
now have a ₹ 5- lakh limit transmission |The earlier limit for such a
procedure was ₹ 1 lakh |For physical shares, in single name without a
nominee, transmission will be applicable for holdings up to ₹ 2 lakh
|Companies have been allowed to fix a limit higher than ₹ 2 lakh if
they want
New norms for passing on the ownership of shares on someone's death
will bring more cases under a simplified procedure
Are banks wrongly branding people as defaulters?
There was a time when banks were ineffective in loan recovery when
retail borrowers defaulted. The Indian legal system moves at a snails
pace. The Reserve Bank of India's (RBI) intervention ensured banks had
to stop using arm- twisting tactics to collect retail debts. That is
when the Credit Information Companies Regulation Act ( CICRA) and the
increasing effectiveness of the credit bureaus licensed under it came
to the rescue and, today, intentional defaults for retail loans are
down to a trickle.
Thanks to credit bureaus, banks now have access to a consumer's
previous loan history and can deny credit to those who had defaulted.
This denial of credit from the formal system is an effective tool to
control intentional defaults. That's why the retail lending books of
banks have not seen any significant defaults, despite the challenging
economic scenario.
That brings us to the subject of this article. The pendulum has
perhaps swung away to the other extreme from the time when banks were
helpless spectators to a borrower defaulting, to the current scenario
where a bank has the power to deny credit to the borrower if he
defaults with them. While it is not my intention to bat for
defaulters, people being wrongly branded as defaulters is a very
serious issue, especially where banks have this power completely in
their hands.
There have been numerous cases where credit card companies debited
annual fees ( after promising free for life credit cards) or insurance
premiums without their customers' permission.
Earlier consumers dealt with it by simply not paying for such
unjustified debits. Now, the reporting of these so- called ' defaults'
has led to stoppage of availability of credit to them for home loans
or car loans or credit cards. They now have to fight the bank at the
banking ombudsman level or in consumer courts. How unjustified these
charges are, can be gauged from the fact that most of these disputes
bought before the ombudsman or consumer courts have been decided in
favour of the consumer, as banks simply have no leg to stand on. Yet,
that has not led to banks re- looking at the data supplied by them to
credit bureaus earlier and voluntarily changing it. The reason is
simple.
They get away by changing the data for only those consumers who choose
to fight it out.
Most consumers meekly pay up.
Credit bureaus have clearly become aweapon that the banks wield even
against a consumer who deserves much better. CICRA provides that banks
will take due care to ensure the data relating to the credit
information maintained by them is accurate and complete while
providing data to credit bureaus. Even when clear errors are pointed
out to the banks for correction, they often initially take a hostile
position, claiming their data is correct till they are forced by the
banking ombudsman or the consumer courts to relent. Although
regulations provide for fines for negligent reporting by the banks,
there is no reported instance of any such fines being levied despite
proven widespread mis- reporting by the lenders, especially credit
card issue.
Credit bureaus take astance that they are merely a reporting
institution and unless the banks correct the data, they cannot do
anything. This is contrary to the CICRA rules requiring them to mark
that such entries are disputed by the consumer and await resolution.
There is also no laid- down grievance procedure with independent
oversight over such an important institution with such mighty power to
control your economic life. Banks have unfettered power to report
whatever they wish to credit bureaus, as well as amend it with
retrospective effect, with no impact on them for wrong reporting.
These powers are already being misused. Reportedly, some nonbanking
financial companies are buying the ' defaulting' credit card and
personal loan portfolios of a bank. Then they are able to collect from
consumers by promising to wipe out the default from credit bureaus'
books if paid a certain amount. This unfettered right to amend credit
bureaus' records with retrospective effect, without any penalty for
wrong reporting in the first place, is already being misused and can
lead to serious consumer issues.
Hopefully, the new consumerfriendly dispensation at RBI will throw
some light into this rather dark regulatory corner and make (and
enforce) rules and levy some stiff fines to bid this incipient
mischief in the bud. Meanwhile, consumers have to grit their teeth and
fight it out.
The writer is CEO, Apnapaisa
FRANKLY SPEAKING
HARSH ROONGTA
Credit bureaus have become a weapon banks wield even against a
consumer who deserves much better
Source Business line
Draft rules on auditors elicit over 10,000 comments
PTI
New Delhi, Nov 4:
Social welfare spending might have been the most discussed topic in
the new companies legislation but the maximum public comments, at more
than 10,000, have come for draft rules related to auditors.
The new Companies Act, replacing the nearly six-decade old legislation
that governs functioning of corporates, is in the process of being
implemented by the Corporate Affairs Ministry.
Overall, the draft rules issued by the government for 29 chapters of
the new Act has received about 26,000 comments.
Out of them, the maximum number of comments have been received on
draft norms related to 'auditors', with the count at 10,903, according
to official data.
Draft rules for Corporate Social Responsibility (CSR), in simpler
terms social welfare spending, elicited 1,772 comments.
In a first of its kind, the new legislation requires certain class of
companies to shell out two per cent of their three-year average annual
profit towards CSR activities. In case, the eligible entities are
unable to spend the required amount, reasons for the same have to be
provided to the Ministry.
Going by official data, the second most commented topic is 'director'
with responses touching 5,992, followed by 'independent director' at
2,619 comments. Among others, the topic of 'investor' has elicited
2,013 comments.
In terms of respondents, the maximum responses have come from the
category 'General Public' at more than 8,800 comments.
So far, the government has issued draft rules in four tranches and the
deadline for the last two phases, covering four chapters, ends
tomorrow.
For the first tranche, that covered 16 chapters, a staggering 20,553
comments were received. It covered chapters on Audit and Auditors,
CSR, Appointment and Qualification of Directors, Meetings of Board and
its Powers, Prevention of Oppression and Mismanagement, Companies
Incorporated Outside India and Account of Companies, among others.
Meanwhile, the second tranche of draft rules - that covered nine
chapters - has elicited 5,218 comments. They included Management and
Administration, Share Capital and Debentures, Appointment and
Remuneration of Managerial Personnel and Registered Valuers.
An official said that some of the comments are repeat ones. The
overall tally of comments also includes comments received on draft
forms for various chapters.
The new legislation, that replaces Companies Act, 1956, was approved
by the Parliament in August this year. The new law has been in the
works for a long time.
(This article was published on November 4, 2013)
--
CS A Rengarajan
9381011200
CS Benevolent Fund is a collective effort towards extending the much
needed financial support to the community of Company Secretaries in
times of distress Let us lend support and join for noble cause.
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