Transmission of shares
This query is : Resolved
16 April 2017
Please advice on this:
One of the shareholder of pvt company died in FY 14-15. But this fact was not know to Auditor and he prepared BS PL for FY 14-15 & 15-16. In Schedule of shareholders holding more than 5% he mentioned deceased name. On the basis of this annual filling of AOC 4 and MGT 7 for both the year filed.
What would be the possible consequences under company act on company and auditor?
One of the shareholder of pvt company died in FY 14-15. But this fact was not know to Auditor and he prepared BS PL for FY 14-15 & 15-16. In Schedule of shareholders holding more than 5% he mentioned deceased name. On the basis of this annual filling of AOC 4 and MGT 7 for both the year filed.
What would be the possible consequences under company act on company and auditor?
17 April 2017
auditors can not force family members of deceased to get the shares transmitted
17 April 2017
Dear Sir,
Auditor is not doing so.
Auditor is not doing so.
02 August 2025
Regarding the situation where a shareholder of a private company died in FY 14-15 but the auditor was not informed, and the financial statements and annual filings (AOC-4 and MGT-7) were prepared and filed with the deceased shareholder still listed:
---
### Possible Consequences under the Companies Act:
#### 1. **On the Company:**
* **Non-compliance in Maintaining Correct Records:**
The company is required under the Companies Act, 2013 to maintain an updated register of members. Failure to update the register after the death of a shareholder is a lapse.
* **Incorrect Filings:**
Filing AOC-4 and MGT-7 with incorrect details of shareholders can be considered as filing of inaccurate documents with the Registrar of Companies (ROC).
* **Penalties:**
The company may be liable to pay penalties for filing incorrect returns and non-maintenance of proper statutory registers as required under Section 88 (Register of Members) and Section 129 (Financial Statements) of the Companies Act.
#### 2. **On the Auditor:**
* **Limited Responsibility:**
The auditor’s duty is to audit based on the information provided by the company. The auditor is not responsible for verifying the status of shareholders beyond the records maintained by the company.
* **No Liability for Non-disclosure by Company/Shareholders:**
If the auditor was not informed about the death and the company’s register was not updated, the auditor’s report cannot be faulted for the incorrect shareholder information.
* **Professional Conduct:**
However, the auditor should recommend to the management to update the register of members once they come to know about the death, if at all.
---
### What should be done now:
* The company should promptly update its register of members to reflect the transmission of shares to the legal heirs or nominees.
* File necessary forms (such as SH-4 for share transmission) with the ROC.
* Make rectification filings for AOC-4 and MGT-7, if possible, for the concerned years.
---
If the company delays or refuses to update the register or file corrections, penalties under the Companies Act may be imposed on the company and its officers.
---
**Summary:**
The primary responsibility lies with the company and its management to update shareholder records and disclose accurate information. The auditor is not held liable for incorrect shareholder details if proper information was not furnished to him/her.
---
If you want, I can help you draft a communication or a plan for corrective action. Would you like that?
---
### Possible Consequences under the Companies Act:
#### 1. **On the Company:**
* **Non-compliance in Maintaining Correct Records:**
The company is required under the Companies Act, 2013 to maintain an updated register of members. Failure to update the register after the death of a shareholder is a lapse.
* **Incorrect Filings:**
Filing AOC-4 and MGT-7 with incorrect details of shareholders can be considered as filing of inaccurate documents with the Registrar of Companies (ROC).
* **Penalties:**
The company may be liable to pay penalties for filing incorrect returns and non-maintenance of proper statutory registers as required under Section 88 (Register of Members) and Section 129 (Financial Statements) of the Companies Act.
#### 2. **On the Auditor:**
* **Limited Responsibility:**
The auditor’s duty is to audit based on the information provided by the company. The auditor is not responsible for verifying the status of shareholders beyond the records maintained by the company.
* **No Liability for Non-disclosure by Company/Shareholders:**
If the auditor was not informed about the death and the company’s register was not updated, the auditor’s report cannot be faulted for the incorrect shareholder information.
* **Professional Conduct:**
However, the auditor should recommend to the management to update the register of members once they come to know about the death, if at all.
---
### What should be done now:
* The company should promptly update its register of members to reflect the transmission of shares to the legal heirs or nominees.
* File necessary forms (such as SH-4 for share transmission) with the ROC.
* Make rectification filings for AOC-4 and MGT-7, if possible, for the concerned years.
---
If the company delays or refuses to update the register or file corrections, penalties under the Companies Act may be imposed on the company and its officers.
---
**Summary:**
The primary responsibility lies with the company and its management to update shareholder records and disclose accurate information. The auditor is not held liable for incorrect shareholder details if proper information was not furnished to him/her.
---
If you want, I can help you draft a communication or a plan for corrective action. Would you like that?
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