Activate Dormant Account and Transmission of Shares: A Complete Investor Guide

Over time, many investors unknowingly allow their financial accounts to become inactive. A change in address, lack of transactions, or the unfortunate demise of an investor can result in bank or demat accounts turning dormant. When this happens alongside inheritance-related matters, the process becomes more complex. To resolve such issues, investors and legal heirs must understand how to activate dormant accounts, the role of an inheritance certificate, and the impact of the SEBI circular on transmission of shares.

This blog post offers a clear and practical explanation of these interconnected topics, helping investors and families safeguard their financial interests.

What Does It Mean to Activate a Dormant Account?

A dormant account is one in which no transactions have taken place for a specified period. In banking and demat systems, inactivity beyond a defined duration leads to the account being classified as dormant or inactive. This status restricts transactions until reactivation is completed.

To activate a dormant account, account holders or legal heirs must approach the bank or depository participant and complete KYC revalidation. This usually includes identity proof, address proof, PAN verification, and a written request for reactivation. In cases involving inheritance, additional legal documents are required to establish rightful ownership.

Reactivation is essential because dividends, recovered shares, or transmitted securities cannot be credited to dormant accounts.

Common Reasons Accounts Become Dormant

Dormant accounts often arise due to simple oversight rather than intent. Some common reasons include:

• Long-term investment with no trading activity
• Non-updation of KYC documents
• Change in residence or contact details
• Death of the account holder
• Migration to online banking or new demat accounts

Understanding the reason for dormancy helps speed up the reactivation process.

Importance of Activating Dormant Accounts for Legal Heirs

For legal heirs, activating dormant accounts is often the first step in claiming inherited assets. Whether it is bank balances, dividends, or shares, reactivation ensures seamless credit and transfer. Without activation, even approved claims such as recovery from IEPF or transmission of shares remain on hold.

Banks and depository participants follow strict compliance norms, making timely activation critical for avoiding delays.

Understanding Inheritance Certificate and Its Role

An inheritance certificate, commonly referred to as a legal heir certificate or succession certificate depending on jurisdiction, is a document that establishes the rightful successors of a deceased individual. It is widely used when transferring financial assets such as shares, mutual funds, and bank deposits.

Why an Inheritance Certificate Is Required

An inheritance certificate helps institutions:

• Identify legitimate heirs
• Prevent fraudulent claims
• Ensure lawful transmission of assets

It is especially important when no nomination was registered by the deceased investor.

Inheritance Certificate vs Nomination

While nomination simplifies asset transfer, many investors overlook it. In the absence of nomination, an inheritance certificate becomes mandatory. Even when a nominee exists, legal heirs may still require supporting documentation depending on the institution’s policy and the value of assets.

Transmission of Shares and SEBI Circular Explained

Transmission of shares refers to the transfer of securities due to the death of a shareholder, as governed by company law and SEBI regulations. The SEBI circular on transmission of shares has significantly simplified the process, particularly for retail investors.

Key Highlights of SEBI Circular on Transmission of Shares

SEBI has issued multiple circulars to ease the burden on investors and legal heirs. Key provisions include:

• Simplified documentation for securities up to a specified value
• Reduced requirement for succession certificates in low-value cases
• Acceptance of legal heir or inheritance certificates
• Faster processing timelines for listed companies

These measures aim to reduce procedural hurdles and promote investor protection.

Impact of SEBI Circulars on Legal Heirs

The SEBI circular on transmission of shares ensures that legal heirs do not face unnecessary delays or excessive legal costs. By standardizing documentation requirements and capping thresholds, SEBI has made share transmission more accessible and transparent.

This is particularly helpful when combined with the activation of dormant demat accounts, allowing heirs to complete the process efficiently.

Step-by-Step Process: Transmission of Shares and Account Activation

Here is a simplified overview of the combined process:

1. Obtain the inheritance certificate or legal heir certificate
2. Apply for activation of dormant bank and demat accounts
3. Submit transmission request to the company or registrar
4. Provide documents as per SEBI circular guidelines
5. Receive transmitted shares in the active demat account

Each step must be completed carefully to avoid rejection or delays.

Common Challenges Faced by Investors and Heirs

Despite regulatory simplifications, challenges still arise, such as:

• Incomplete or mismatched documents
• Multiple heirs with conflicting claims
• Delays in obtaining inheritance certificates
• Lack of awareness about SEBI circular provisions

Professional guidance often helps resolve these issues efficiently.

Why Compliance Matters in Financial Recovery

Regulatory compliance is not optional in financial recovery and inheritance matters. Whether activating a dormant account or transmitting shares, adherence to SEBI guidelines and institutional policies ensures legitimacy and protects all parties involved.

Ignoring compliance may result in prolonged delays or even rejection of claims.

Conclusion

Managing inherited financial assets requires a clear understanding of regulatory processes and documentation. Learning how to activate dormant accounts, obtain an inheritance certificate, and follow the SEBI circular on transmission of shares empowers investors and legal heirs to reclaim and manage assets confidently.

With the right approach, timely documentation, and regulatory awareness, what seems like a complex process can become structured and manageable ensuring financial continuity and peace of mind for families and investors alike.