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How registrar and share transfer agents slap the rulebook on hapless retail shareholders

Even probates granted by high courts are unnecessarily put to further scrutiny by RTAs, thus delaying transfer shares to legal beneficiaries

March 17, 2021 / 09:41 AM IST

Dematerialisation of securities has been a significant contributor to curbing inefficiency and creating a conducive investment ecosystem. With dematerialisation, the role of registrar and transfer agents (RTAs) is restricted.

So, serving shareholders who hold stocks in physical form, providing support to companies for administering shareholder entitlements – record date for dividend declaration, rights and bonus entitlements. These apart Investor Education and Protection Fund (IEPF) support and payout reconciliation are the other activities. With more than 95 percent shares held in demat form, these activities are virtually on cruise control.

The role of RTAs, being process driven, is labour-intensive. RTAs abide by a standard checklist tick mark driver module. Inadequate training of operating hands at RTAs and restricted knowledge of companies and securities related acts, are primary reasons behind the undue harassment faced by shareholders. Equally to be blamed are the Company Secretary and the Chairman of Stakeholders Relationship Committee, who seldom deliberate on periodic reports provided by the RTA or even revisit the relevance of transmission procedures and other documentation needs.

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Transmission could be a real nightmare

Rustomjee Adil Randeria, aged 75, is the Executor and Sole beneficiary of assets bequeathed by his mother, paternal uncle (unmarried) and maternal aunt (unmarried), through their respective Wills (registered). Rustomjee followed the legal process and secured individual Probate from competent court of jurisdiction (High Court) of all the aforesaid three Wills.

The Probates were granted over a period; which was a process that lasted 18 to 20 months and by the time the court order came, it was around 24 months since the filing of the petitions. Rustomjee complied with all requirements needed for transmission as per Companies Act 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015 and in alignment with the Securities Contracts (Regulation) Act, 1956. The instances below are shocking.

-Rustomjee was informed by registrar and transfer agents of an MNC that apart from the Notarised copy of Probate Order submitted, they would require a Notarised Copy of the Petition as well. Why was it asked when the Probate itself was submitted?

-A highly reputed company which has an in-house share department wanted a Court certified copy of a Probate (not a Notarised Copy).

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Additional documents sought

-An RTA of a leading FMCG company wanted a Surety whose annual Income Proof (as per recent ITR) is equivalent or higher than the market value of the shares that were to be transmitted to Rustomjee. This stipulation is draconian and despite repeated letters written to the Company Secretary, Chairman of Stakeholders Committee of Directors, there has been no response. Rustomjee has now approached SEBI through SCORES, which is an online platform designed to help investors to lodge their complaints, pertaining to securities market.

-One of the RTAs of an MNC has sought Rustomjee’s signature to be verified and attested by two different banks. While Rustomjee has just submitted (to the RTA) all the papers, including the signature verification of one Bank with which Rustomjee has an account for five decades and also written to the RTA wanting to know under which law of the land he needs to have more than one bank account and that if submission of only one bank account signature verification and attestation bars him from the his claim as a legitimate beneficiary as endorsed by a Probate.  A reply is awaited from the RTA.

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-An RTA of a leading pharma company refused the transmission on the grounds that the shares of his company were not mentioned in the Probate, though shares were present in the name of the deceased as per his register of shareholders. Rustomjee had to inform that a Testator makes a Will on a particular date and he mentions all the assets; however, as the Testator is not aware when he would die, there could be a change in the assets profile and configuration from the date of making a Will till date of demise. Thus to address such concerns, every Will normally has a residual clause to include such assets. The RTA insisted that Probate is only for assets specified not appreciating that Probate certifies the validity of the Will, its genuiness and hence all contents a mentioned in the Will gets blessings from the Court including the residual clause. Rustomjee has been advised by his contemporaries, that an independent legal opinion explain the same to the RTA may aid in RTA changing its unexplainable stand. While Rustomjee is convinced that a legal opinion is no insurance for the RTA, but that’s the way RTA and the Companies ill-treat shareholders who are part owners.

In summation it leads us to believe that Probate granted by competent court of jurisdiction (High Courts) is unnecessarily put to further scrutiny and is undermined by RTAs. Now-a-days all RTAs have subscribed to legal websites, wherein each of the Court’s decisions can be verified. Despite this, they harass the shareholders.

(Names have been changed to protect identities)

Rajat Dutta is Founder & Initiator, Inheritance Needs Services
Tags: #invest #will
first published: Mar 17, 2021 09:41 am