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What Are SEBI Regulations for Transfer of Physical Shares?

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What Are SEBI Regulations for Transfer of Physical Shares

What Are SEBI Regulations for Transfer of Physical Shares?

Transfer of shares process to the demat account had a few glitches which confused the investors. However, the SEBI soon came up with the guidelines to clear the ambiguity in the process. This cleared the doubts of the investors regarding transfer of physical shares. In the following sections, we will learn in detail about SEBI guidelines on transfer of physical shares. We will tackle various issues faced by the investors while transferring physical shares and understand the board’s stand on those issues. The guidelines have come as a beacon of relief provided by the Board to the investors.  So, without further ado, let us understand the SEBI guidelines for transfer of physical shares.

Various Issues and their Solutions by the Board

  • What if the Transferor of shares doesn’t have the PAN card? 
  • What to do in case of name or signature mismatch?

The board had previously received a lot of queries on issues mentioned in the question above. The issues started coming up as the transferees faced difficulty in giving documents to the RTAs (Registrar and Transfer Agent) of companies. This adversely affected the process to transfer documents and securities of the investors. 

To resolve this issue, the board has come up with standards for transfer of shares and securities in physical form. The board released a circular to clarify all the issues faced by the investors in transfer of their securities. The circular was released as per the Regulation 101 and 102 of LODR. These Regulations were aimed at resolving all ambiguity concerning transfer of shares in physical 

Standards for Transfer of Securities in physical Form

  1. Non-availability of PAN

To resolve this issue, the board has cleared that for the transfers executed before 01 December 2015 (prior to notification of LODR), the traders can be made with or without using PAN. However, the transfer should be done according to the requirements of quoting PAN for applicable Income Tax norms. This means that only the transfer executed after the notification of LODR should need the PAN of the transferor. 

  1. Mismatch of Name in PAN or Signature in PAN or Share Certificate

Investors have faced such issues for so long. This was especially the case with female investors whose names were changed after marriage. In such a scenario, the board has suggested the use of the following documents as addition or supplement proofs for the names. 

  • Legal Marriage Certificate
  • AADHAR card 
  • Copy of Gazette notification concerning name change of transferor.
  • Passport of transferor

There were also situations where transferors couldn’t be traced or the signatures were mismatched as the transferors hadn’t updated their signatures in due time. To resolve this issue so that the buyer doesn’t feel stranded in case the transferor isn’t traced or the signature mismatch SEBI laid out the following guidelines:

  1. Rules for Signature Mismatch Resolution

The procedure to be followed in such situations has been elaborated in the Para (B)(2), Schedule VII of LODR.  The brief procedure in such a situation is as follows: 

  • The transferor has verified his signatures by updating the signature with the bank and sharing its attested copy along with an affidavit and cancelled cheque in the name of Company. This should be submitted with the current contact details of the transferor.
  1. Ways to Resolve Missing Transferor Issue

  • To track a missing transferor, the RTAs can contact him by tracking his dividend history, KRAs or Depositories, contacting his bank or through any contact information provided to the Depositories. If in case, the transferor is not responding to these contact methods, the buyer can submit the following additional documents like, address proof of buyer, and indemnity bond in the SEBI prescribed format. An undertaking should also be submitted by the transferee stating that he/she will not try to transfer physical securities during the lock-in period. This lock-in period is of 6 months post the share transfer date. The lock in period is approved through a stamp affixed by the RTA. For further verification, RTAs can also ask details of the KYC. 
  • The RTAs of the company should publish a notification in a national English daily newspaper informing about the transfer. The notification should ask for objections (if any) to be raised to the companies. It should also publish the notification in a regional newspaper of the area where the company’s registered office is located. The ad should mention that the objection must be raised within 30 days from the date of release of advertisement. A copy of the ad should also be published on the website of the listed entity.
  • If no objection is raised within 30ndaysbof release of transfer notification in the newspaper, the transfer will remain effective.
  • In the transfer notification, the names of the transferor and other relevant details should be mentioned. The details should be disclosed on the company’s website for 6 months. The same information is published on the stock exchange’s website as corporate information.
  1. Rules for Differing Address

If the address registered with the RTA differs with the address attested by the bank of the transferor, then the RTA should update the new address after getting it verified from the bank. With this new rule in place, the hassles related to Differing Address will be resolved quickly.

To Conclude…

The SEBI has released this circular to resolve most of the hassles encountered by the transferors. The circular includes solutions to many other issues as well. The target of the board is to reach hundred percent digitisation of shares in the minimal time. Physical Shares are the reason for a lot of problems. They could be damaged, are hard to trade from a remote place, and could be stolen too. Thus, Dematerialisation of such shares is the solution.

This is the reason why the board is working aggressively to remove all the hurdles in the way of transferring physical shares into a digital demat account. To understand the latest provisions and to easily conclude the process of share transfer, it is recommended to companies that they connect with a reputed finance and legal consultancy firm.

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