Some people are holding shares not transferred in their name and don’t know how to go about the transfer. Here is the procedure
Corrected: As per Companies(Share Capital & Debentures) Rules, 2014, form 7B has been replaced with form SH-4
UPDATE: Updated to include additional information provided by NSDL's Rajesh Doshi on demat and bank names that provide franking facility
Several people are still left with shares in physical format. If these are transferred in their name, they can continue to hold them and get them dematerialised anytime they want to. What about those who are holding shares not yet transferred in their names? One cannot sell these shares in physical forms through stock exchanges, unless it is dematerialized. Several readers of Moneylife, said they wanted to transfer physical shares jointly held. But they don’t know the way out.
Asking National Securities Depository Ltd (NSDL) is of no help. You will get a standard reply like this: "Shareholders can dematerialise physical shares in their own name. As such, transfers of physical shares are outside the purview of depository system. There is also no trading in physical shares on the stock exchanges and hence they can only be transferred in private deals. The recommended course of action for investors holding physical shares is to dematerialise them. Transfer of demat shares is also exempt from stamp duty."
When we asked around, one member of Moneylife Foundation, Adil Daruwalla turned out to be helpful on how get the franking done. We made our own enquiries. Here is the procedure to transfer shares in physical form...
1. Send the share certificates along with the Share Transfer Deed (Form SH-4 available with stock exchange and brokers) duly filled in, executed and affixed with appropriate share transfer stamps (available with authorised stamp vendors) at 0.25% of the market value (of the scrip) on the date of execution of the transfer deed. Self certified copy of the PAN Card of the transferee(s) needs to be submitted along with the instrument(s) of transfer and Stamp duty has to be affixed.
Since 1 July 2002, Maharashtra government has banned sale and use of share transfer stamps and mandated franking for such deeds. This facility was available at Bank of India branch in BSE building. However, since December 2014, this facility has been closed. Franking now happens at Town Hall General Stamp office only or other central offices of collectorate of stamp fees within Maharashtra State, through online registration or without online registration. The process can be found at https://gras.mahakosh.gov.in.
a. For paying the stamp duty without registration, you can use your online bank account. Here are the steps involved in the process...
I. Select Pay without registration
II. Select Department as Inspector General of registration
III. In payment type, select Non Judicial Stamps
IV. Select the appropriate location in District
V. In office name, select General Stamp Office Mumbai
VI. In Scheme Name, select 'Purchase of franking code SOS Mumbai only'
VII. Select year as 2014 - 2015
VIII. In Article Code, select One time Adhoc
IX. Fill in the Amount
X. Give Payee details
XI. Select e-payment/Bank
XII. Fill in image text
XIII. Click on Submit
XIV. Print GRN MTR6 Challan
Take this printout with your share transfer form to the office to get your stamp fee franked on your transfer form.
i. If you do not have an online account, then
I. Print the GRN MTR6 Challan
II. Fill in your details and make the payment at your concerned bank's branch where they accept payment for general stamp office with pay in slip etc.
III. Take the Form and the paid amount along with your transfer for franking.
In both cases, you will have to carry a letter addressed to the Additional Collector (Stamps) in following format...
The Additional Collector Stamps
General Stamp Office Fort
Sub:- To Affix Special Adhesive Stamps on Share transfer form
With reference to the above mentioned subject, I have to state that I have paid stamp duty of Rs.________________ as per MTR Challan No 6 (GRN No. __________________________)
I hereby request you kind selves to kindly affix the requisite stamp duty on the same.
(Note: For Shares, stamp duty @ 0.25% of the market value or the consideration amount (whichever is higher) should be affixed on the instrument of transfer.)
One can submit the letter, form and receipt to the General Stamp Office between a specific time period. The franked documents can be collected between a specific period the next day.
Rajesh R Doshi, Senior Executive Director of NSDL said, "My understanding is that any bank, which offers franking facility for legal documents can also provide the same for transfer deeds. We use services of Kapol Cooperative Bank branches at Kalbadevi and Fort for franking of legal documents. We have inquired with them and they have confirmed that they would provide services of franking transfer deeds for physical share transfer. Investors can approach them. There are other banks such as Punjab and Maharashtra Co-operative (PMC) Bank and Citizen Co-operative Bank who also provide facility for franking legal document however we have not used their facility. Investors may inquire with them as well."
Here is the checklist for getting your deed franked
Covering letter to the Additional Collector Stamps. Two copies, one to submit and second for receipt of the office and collection next day.
MTR 6 Challan with the GRN No if you have done e payment
Share transfer form
Every share transfer form that has to be franked requires the above process.
After getting the deed franked, the investor can send the share certificates (physical shares) and the share transfer deed (in form SH-4) duly filled in and signed to the company or registrar. It takes about 10 to 21 days to process the transfer.
The statutory time limit fixed for completing a transfer is one month under the Listing Agreement and two months under the Companies Act, 1956.
How to convert shares into demat form?
Dematerialisation (demat in short form) signifies conversion of a share certificate from its present physical form to electronic form for the same number of holding. Demat is optional and an investor can still hold shares in physical form. However, she has to demat the shares if she wishes to sell the same through the stock exchanges. Similarly, if an investor purchases shares, she will get delivery of the shares in demat form.
There are two depositories, NSDL and Central Depository Services Ltd (CDSL), which hold securities of an investor in electronic form, through depository participants (DPs). DPs provide the link between an investor and company through the Depository.
Mr Doshi from NSDL said, physical shares can be dematerialized in the demat account in the name(s) of share holders holding physical shares. In case, shares are held jointly in physical form by investors, then the same can be dematerialized by opening a demat account in joint names.
"However," he said, "as I understand, investors prefer to make use of existing demat account held in single name by first transferring physical shares held in joint name into single name. Transferring physical shares requires payment of transfer fees through franking of transfer deed documents, a service investors used to avail from BOI Shareholding. Since BOI Shareholding has now stopped this service, investors can use franking facility provided by some banks."
Here is how you can convert your physical shares into demat...
• Open a Beneficiary Account with a DP registered with SEBI and with any one of the depositories, NSDL or CDSL.
• Submit the dematerialization request form (DRF) (in triplicate) to your DP duly filled in and signed by all the shareholders, along with share certificate(s) and necessary documents. Ensure that the names and order of names as per certificate(s) matches with the names and order of the names as per the DP account.
• Obtain an acknowledgement from the DP.
• On receipt of DRF, the DP will generate a dematerialization request number (DRN), which is electronically transmitted to the Company or STA through the concerned Depository.
• Simultaneously, the DP will send the physical certificate(s) with the original DRF to the Company or STA for verification and confirmation.
• The Company or STA, on receipt of DRF and share certificate(s) will process the request. If the DRF is found to be in order, i.e. verified signature and certificate(s), then it will electronically confirm the request.
• The DP on receipt of such confirmation, will credit the account with the shares dematerialized.
• The DP will hold the shares in the dematerialised form thereafter on the shareholders behalf and she will become beneficial owner of these dematerialised shares.
Important points to note
1) Validity of the executed instrument of transfer:
for shares: - 60 days from the date of execution.
for debentures: - for an indefinite period
2) SEBI has notified vide its Circular No. MRD/DoP/Cir-05/2009 dated 20 May 2009 that it is mandatory for all transactions in the securities market including transfer of shares in physical form of listed Companies to be accompanied with copies of PAN card/s of all the transferees. Therefore attach self-certified copies of PAN card/s of all the transferees along with the instrument of transfer
3) Keep photocopies of certificates, instrument(s) of transfer and other documents sent by post. In case of a loss in transit, they come handy.
4) Always include your complete address along with pin code while filling in the instrument of transfer/opening an account with a depository participant.
5) Do not send share certificates / DRF documents to the Company / Registrars directly.