Let me point out at the outset itself that there is no specific provision in this regard in the main body of the Companies Act (i.e., any specific section) which covers this issue.
However, Regulation 23 of Table F in Schedule I to the Companies Act, 2013, covers this issue. But, firstly, what is Table F? Is it mandatory? Is it applicable to all companies? Let me first clarify this issue.
Section 5 of the Companies Act, 2013 provides that the articles of a company shall be in respective forms specified in Tables F, G, H, I and J in Schedule I as may be applicable to such company. It is also provided therein that a company may adopt all or any of the regulations contained in the model articles applicable to such company. The company can exclude or modify the regulations that are contained in these model regulations.
Now, Table F in Schedule I of the Companies Act, 2013, contains Articles of Association of a Company Limited by Shares. These are basically model regulations, which can be excluded or modified by a company. However, as per Section 5 of the Companies Act, in case of any company limited by shares, which is registered after the commencement of the Companies Act, 2013, insofar as the registered articles of such company do not exclude or modify the regulations contained in the model articles in Table F, those regulations shall, so far as applicable, be the regulations of that company in the same manner and to the extent as if they were contained in the duly registered articles of the company.
Therefore, while most companies limited by shares adopt the regulations mentioned in Table F, it is not mandatory and the regulations contained therein may be excluded or modified by a company in their application to such company.
With this caveat, now let me refer to Regulation 23 in Table F, which lays down as under:
“23.(i) On the death of a member, the survivor or survivors where the member was a joint holder, and his nominee or nominees or legal representatives where he was a sole holder, shall be the only persons recognised by the company as having any title to his interest in the shares.
(ii) Nothing in clause (i) shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by him with other persons.”
So, what this Regulation provides is that on the death of a member (i.e., shareholder), the survivor or survivors where the member was a joint holder shall be the only persons recognised by the company as having any title to his interest in the shares.
Now in the facts of your question, if two persons are joint shareholders in a listed company and one of them dies, then the survivor of these two persons will be only person who will have title to the interest of the deceased in those shares. This means the shares will now be in the name of the survivor alone. The successors of the deceased will not get a right in those shares.
As I mentioned above, most companies adopt these model regulations, such as in Table F. So, this is the legal position in most companies on this issue. However, if a particular company has modified or excluded the relevant regulations from Table F (or, the equivalent Table in the old Companies Act of 1956), then the provision in the relevant modified article will apply. So, ultimately, you’ll have to check the relevant articles of the company concerned to get the correct answer on this issue. But, for most of the companies, the above legal position mentioned by me would apply.
Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers. List of his YouTube Videos.
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