Regulation 40: Transfer and Transmission of Securities

Regulation 40 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

The rule that governs everything here is short: securities of a listed company can be transferred only in dematerialised form.

Everything else in Regulation 40 follows from it — what happens to shares still held on paper, how transmission works when the holder has died, and what a company must do with shares nobody has claimed.

Transfer of securities is only in dematerialised form. A holder with physical certificates must dematerialise them before transferring. Transmission and transposition are the exceptions handled differently, and service requests — including replacement of a lost certificate — are processed by issuing securities in demat form, not on paper. Shares that remain unclaimed after the prescribed reminders go into an unclaimed suspense account, where the holder's rights survive indefinitely.

Transfer: demat only

A request to transfer securities held in physical form is not processed as a transfer. The holder must first dematerialise the holding, after which the transfer happens through the depository system in the ordinary way.

Practical consequences worth stating plainly:

A share certificate in a drawer is not liquid. It cannot be sold until it is dematerialised, and dematerialisation takes time and requires the holder's name and signature to match the company's records — which, for a certificate issued decades ago, they frequently do not.

Promoters have no latitude at all here. The entire promoter and promoter group holding must in any event be in demat form. Shareholding pattern →

Mismatched records are the real obstacle. A changed name after marriage, an old address, an unregistered signature, a joint holder who has died — each has to be resolved before dematerialisation, and each takes longer than the holder expects.

Transmission and transposition

Transmission — the passing of securities by operation of law on the death of a holder — is not a transfer, and it is processed differently. The legal heir or nominee submits the prescribed documents to the registrar, and the securities are transmitted.

Where the securities were held in physical form, the transmission is effected and the securities are issued in dematerialised form, so the estate does not receive a fresh certificate.

Transposition — changing the order of names in a joint holding without changing who the holders are — is likewise handled outside the transfer route.

On the timeline, the registrar must process transmission requests within the period specified, and delay is a grievance the stakeholders relationship committee reviews. In practice the delay is more often at the claimant's end — succession documents, indemnities and, for larger holdings, a succession certificate or probate. Stakeholders Relationship Committee →

Service requests are processed in demat

A shareholder asking for a duplicate certificate, a claim from the unclaimed suspense account, renewal or exchange of a certificate, endorsement, sub-division or consolidation, or splitting or consolidation of folios, does not receive paper back.

The company issues the securities in dematerialised form in response. The effect is that the physical layer shrinks with every service request, and it is deliberate — paper certificates were the source of most of the fraud risk, most of the delay, and virtually all of the reconciliation failures in the registry.

For a company, the operational point is that the registrar's process for these requests must be built around demat issuance, and the shareholder must have a demat account. Where they do not, the securities go into a suspense escrow until they open one.

The unclaimed suspense account

Shares issued in an offer that remain unclaimed — typically because the allottee's address or bank details were wrong — follow a defined sequence:

Three reminders. The listed entity sends at least three reminders to the allottee at the available address.

Transfer to the unclaimed suspense account. Where there is no response, the shares are credited to a demat suspense account opened for the purpose, with a stock broker or with the depository, held on behalf of the allottees.

Rights preserved. The shares sit there and the allottee's claim survives — the entitlement does not lapse with time. Corporate benefits — dividends, bonus shares, splits — accrue to the account and are held for the claimant.

Voting rights frozen. The voting rights on shares in the suspense account remain frozen until the rightful owner claims them.

Claim on request. When an allottee comes forward and their entitlement is verified, the shares are credited to their demat account — not issued as certificates.

The account balance and the movement in it are disclosed in the annual report, so the trend is visible. A balance that never reduces suggests the company has stopped trying to trace holders. The annual report →

What the company must have in place

A registrar and share transfer agent, appointed under Regulation 7, or the facility maintained in-house with the entity registered as a share transfer agent. Any change requires the prescribed intimation.

Delegated authority, properly recorded. Where the board delegates the power to process transfers and service requests to a committee, the compliance officer or the registrar, the delegation must be recorded and the delegate must report on its exercise to the board at its meetings.

A periodic certificate from a practising company secretary confirming that the requests received have been processed within the specified time, filed with the exchange.

No refusal on grounds of a debt owed to the company. A listed entity may not decline to register a transfer or transmission on the ground that the holder is indebted to it on any account. The register is not security for the company's own claims.

Key takeaways

• Transfer only in dematerialised form — physical certificates must be dematerialised first.
• Transmission and transposition are handled outside the transfer route.
• Service requests are answered in demat, including duplicate certificates.
• Mismatched holder records are the practical obstacle, not the rule.
• Unclaimed shares go into a suspense account, with rights preserved and voting frozen.
• The suspense account balance is disclosed in the annual report.
• A company cannot refuse a transfer because the holder owes it money.

Read next

• Regulation 31: Filing the Shareholding Pattern
• Regulation 20: Stakeholders Relationship Committee
• Regulation 42: Fixing and Intimating the Record Date
• Demat Account — SEBI Requirements and Process

Disclaimer: Positions stated as on 5 September 2026. The rules on physical securities and service requests have been tightened in stages — verify the current position on sebi.gov.in before relying on any of this.