Inheritance of unlisted shares is the process by which shares held in a private or pre-IPO company pass on to a nominee or legal heir after the original shareholder's death. Unlike listed shares, this process called "transmission" in company law is not handled through a stock exchange or depository alone. It usually involves the company's own board approval, registrar processes, and sometimes probate, making it slower and more paperwork-heavy than most people expect.
If you're an heir who has just discovered that a family member held shares in an unlisted or pre-IPO company, or you're planning your own estate and want your nominees to face fewer hurdles later, this guide walks through exactly how the process works, what documents are needed, and where things commonly go wrong.
When a person holding listed shares passes away, the process is relatively standardised. Depositories like NSDL and CDSL have well-defined transmission workflows, and once documentation is submitted, shares move to the nominee's demat account fairly predictably.
Unlisted shares don't sit inside this same ecosystem in the same way. Depending on how the shares were held, transmission can involve:
This means the timeline, documentation, and even the point of contact can vary significantly from one company to another, something heirs are often unprepared for.
This is where a lot of confusion happens, and it's worth getting right early.
A nominee is the person the original shareholder formally named (through a nomination form) to receive the shares upon death. Under Section 72 of the Companies Act, 2013, a valid nomination allows the company to transmit shares directly to the nominee, often with fewer formalities, because a nominee is the person designated by the shareholder to receive the securities upon the shareholder's death and facilitates the transmission process. Section 72 of the Companies Act, 2013 provides for nomination of securities. However, nomination should not automatically be understood as conclusively determining the ultimate beneficial ownership of the deceased's estate. Depending on the circumstances, the nominee may hold the securities subject to the rights of the legal heirs under the applicable succession law. Therefore, nomination generally simplifies the transmission process but does not necessarily eliminate potential succession disputes.
A legal heir, by contrast, is someone entitled to inherit under succession law either through a will or, in the absence of one, through applicable personal law (Hindu Succession Act, Indian Succession Act, or other personal laws depending on religion). If there's no valid nomination, the shares go through the legal heir route, which typically requires more documentation.
It's important to understand that nomination does not override a will in all circumstances; courts have taken varying positions on this over the years, and companies sometimes ask for legal heir certificates or succession documents even when a nominee exists, particularly if there's a dispute or ambiguity. Being named a nominee simplifies the process; it doesn't always eliminate the need for further verification.
The exact list varies by company, but most unlisted companies and their RTAs will ask for a combination of the following:
Some companies also request an affidavit declaring that the applicant is the rightful claimant, especially for higher-value holdings.
Here's a practical framework for how this typically unfolds:
Step 1: Identify how the shares are held. Check whether the shares exist in demat form (look for a CDSL/NSDL statement) or as physical certificates. This determines which set of procedures applies.
Step 2: Contact the company or its RTA. Unlisted companies don't always have a dedicated investor relations desk, so this step alone can take time. Ask specifically for their transmission process and document checklist.
Step 3: Gather the required documents. Based on whether a valid nomination exists, prepare either the nominee-route documents or the legal heir-route documents (succession certificate, will probate, etc.).
Step 4: Submit the transmission request. This usually goes to the company secretary or RTA, along with the indemnity bond and supporting paperwork.
Step 5: Processing and registration of transmission.
The company/RTA or, where applicable, the depository/DP processes the transmission request and updates the relevant records in accordance with the applicable legal and procedural requirements. For physical holdings, the company's Articles and internal authorisation procedures may determine how the transmission is approved and recorded.
Step 6: Update of records.
Where the shares are held in dematerialised form, the transmission request is generally processed through the deceased holder's depository participant in accordance with the applicable depository and SEBI procedures. The company/RTA may also be involved depending on the nature of the security and applicable process.
Step 7: Confirmation and share certificate/demat credit. The heir or nominee receives either a new physical share certificate or a demat credit confirming ownership.
This process can take anywhere from a few weeks to several months, depending on the company's responsiveness and whether documentation is in order the first time.
| Aspect | Nominee Route | Legal Heir Route |
| Legal basis | Valid nomination under Companies Act, Section 72 | Succession law / will, in absence of nomination |
| Documentation | Nomination form, death certificate, indemnity | Succession certificate/probate, legal heir certificate, NOC from other heirs |
| Typical timeline | Faster, if nomination is on record and undisputed | Slower, often several months due to court/legal processes |
| Dispute risk | Lower, but not zero if other heirs contest | Higher, especially with multiple heirs or no will |
| Company's discretion | Still requires board approval, but less scrutiny | Greater scrutiny, may seek legal opinion before transmission |
| Factor | What to Check | Good Sign | Red Flag |
| Nomination status | Was a valid nomination form filed with the company? | Nomination on record, matches current family situation | No nomination, or one that's decades old and outdated |
| Share holding form | Physical certificate or demat account | Demat holding, easier to trace and transfer | Old physical certificates with no clear paper trail |
| Company responsiveness | How quickly does the company/RTA reply to queries? | Clear checklist provided within a few days | No dedicated contact, vague or delayed responses |
| Documentation completeness | Are all required documents ready and valid? | Death certificate, ID proof, indemnity bond all in order | Missing succession certificate or unclear heirship |
| Other heirs' consent | Do other family members agree on entitlement? | NOC obtained without dispute | Contested claims or sibling disagreements |
| Company's financial health | Is the underlying company still operational and compliant? | Regular filings with MCA, active business | Defunct company, no recent filings, unclear status |
| Valuation clarity | Is there a recent, credible valuation of the shares? | Recent funding round or independent valuation available | No valuation reference point, illiquid holding |
Once transmission is complete (or even while it's in progress), heirs often face a follow-up question: what to do with the inherited shares. This isn't about specific investment advice, but a few things are genuinely worth evaluating:
These factors help heirs make an informed decision about whether to hold, sell through a secondary transaction, or wait for a liquidity event without treating the shares as something to act on impulsively.
Supremus Angel works with investors and families navigating pre-IPO and unlisted share holdings, including situations involving inherited shares. This includes helping investors understand the current valuation context of a holding, connecting with the relevant company or RTA processes where possible, and offering clarity on how a specific unlisted holding fits into an investor's broader portfolio. The platform does not provide legal or tax advice, and heirs are encouraged to consult a qualified professional for succession and taxation matters specific to their situation.
1. Do unlisted shares require probate to be transmitted to heirs?
Not always. If a valid nomination exists, probate may not be required. In its absence, especially with a will, many companies do ask for probate or a succession certificate, depending on the value and complexity of the estate.
2. Can a nominee sell inherited unlisted shares immediately after transmission?
Once transmission is complete and the nominee is recorded as the shareholder, they can typically sell through a secondary transaction, subject to the company's transfer restrictions (right of first refusal, board approval clauses, etc., if applicable).
3. What happens if there's no nomination and no will?
The shares are transmitted according to the applicable succession law (Hindu Succession Act, Indian Succession Act, or other personal law), often requiring a legal heir certificate or succession certificate from a court.
4. Is transmission of unlisted shares taxable?
Transmission itself is generally not a taxable event for the heir. Capital gains tax may apply later, when the shares are eventually sold, based on the original holder's cost of acquisition and holding period.
5. How long does the transmission process usually take?
It varies widely from a few weeks with complete documentation and a responsive company, to several months of legal documentation (succession certificate, probate) is required.
6. What if the company is no longer operational or traceable?
This does happen with some unlisted holdings. Heirs may need to check company status with the Ministry of Corporate Affairs (MCA) portal and, if the company is defunct, the shares may hold limited or no practical value.
7. Can multiple legal heirs jointly hold transmitted shares?
Multiple legal heirs may be able to receive shares jointly where permitted by the applicable transmission procedure and the company's/depository's records. Alternatively, the heirs may need to establish their respective entitlements and, where appropriate, execute a family settlement, NOCs or other documents to facilitate transmission to one or more claimants.
8. Is a nomination form mandatory for unlisted shareholders?
It's not legally mandatory, but strongly advisable. A registered nomination significantly simplifies and speeds up the transmission process for the family.
9. Do unlisted companies have a standard transmission process like listed companies? No. Unlike listed companies governed by depository regulations, unlisted companies often have their own internal processes, which can vary in speed and documentation requirements.
10. What is the difference between "transfer" and "transmission" of shares?
Transfer refers to a voluntary sale or gift of shares between living parties. Transmission refers specifically to the transfer of shares due to death, insolvency, or similar operation of law, and follows a different legal process.
