Going through the records of a deceased person is an important task for the executor and can be a huge undertaking, particularly when the individual held on to everything. Sometimes, a search of the deceased’s records reveals surprising new assets. What should an executor do when they discover evidence that the deceased held shareholdings in a public company in the form of share certificates?
It has become less common to hold “physical” share certificates in public companies, such as banks, oil companies, etc. Nowadays, most individuals will hold their investments in investment accounts. Alternatively, if shareholdings are held outside of an investment account, then those shares are often registered with the transfer agent for the company in in their registry or in the direct registration system (the “DRS System”). However, there are still instances where physical share certificates may be found amongst a deceased person’s papers while administering an estate.
What is a Transfer Agent?
What is a transfer agent? An agent, such as Computershare Investor Services, Inc. (“Computershare”) or TSX Trust Company (“TSX”), being the most common transfer agents in Canada, are often appointed by companies to maintain the records of security owners. They are responsible for issuing and cancelling certificates reflecting the ownership of the securities and will also deal with processing estate transfers. The agent is tasked with maintaining the name, address, and tax information (including residency) for each shareholder.
Contacting the Transfer Agent
The first step as an executor, is to either call or write to the transfer agent for the company for which share certificates are held. The executor will need to advise the transfer agent of the death of the deceased and request information about his or her shareholdings at the date of death.
The transfer agent will send a letter confirming the shareholdings held by the deceased, together with the transfer requirements. The confirmation of shareholdings will provide the executor or their advisors with information as to how the shareholdings are held – (i) certificate form and/or (ii) in the DRS System. It is possible that a deceased can hold shareholdings in physical form as well as in the DRS System. To be able to properly determine any estate administration tax that is payable, and to correctly complete the deceased’s final income tax return, the executor will need to look up the value of the shareholders as at the date of death A good resource is the Toronto Stock Exchange.
Once the executor is ready to proceed with the transfer of shareholdings, they will need to review the requirements provided by the transfer agent. Typically, the executor will need to provide the following documents to the transfer agent to effect a transfer of the shareholdings:
- a notarial copy of the Death certificate;
- a notarial copy of the Certificate of Appointment of Estate Trustee (with or without a Will);
- a Declaration of Transmission (usual provided by the transfer agent);
- the original security certificate (if the deceased held certificates) or a DRS System statement;
- a Securities Transfer Form.
The Declaration of Transmission is to be signed by the executor in the presence of a commissioner for taking oaths and affidavits or a notary public. The commissioner/notary will be required to affix his or her stamp/seal. A separate Declaration of Transmission is required for each company that the deceased held shares in.
The executor will need to have their signature guaranteed on the Securities Transfer Form by one of the following:
- Signature Guarantee
- Medallion Guarantee
A Signature Guarantee is only acceptable if it has been obtained from the following Schedule I Chartered Banks: TD Bank, Royal Bank of Canada or Scotiabank. The Signature Guarantee must affix their stamp which clearly indicates either “Signature Guaranteed” or “Endorsement Guaranteed”. The authorized officer of the bank providing the Signature Guarantee must also print their name and their signing authority number.
If a Medallion Guarantee is attainable for securities held in the form of a DRS statement, it will eliminate the requirement to submit any legal documents to complete the transfer (i.e., the executor won’t have to send the death certificate or Certificate of Appointment). A Medallion Guarantee may be obtained from a member of an acceptable Medallion Guarantee Program (STAMP, SEMP or MSP). All broker dealers as well as many banks and credit unions participate in a Medallion Signature Guarantee Program. The guarantor MUST affix a stamp in a space above bearing the actual words “Medallion Guarantee” and containing a unique number with a letter prefix based on the dollar value of the security.
If, after communicating with the transfer agent the executor has determined that there are share certificates missing, the executor will need to contact the transfer agent again and advise that the certificates are missing, including the circumstances surrounding the loss, damaged or destroyed certificates (if known) before completing the transfer documents. The transfer agent will provide additional instructions on how to deal with those lost certificates, which often includes providing an Affidavit of Loss and Indemnity and a bond.
Submission of Documents
Once the executor has all of the documents completed and signed based on the requirements provided by the transfer agent and any fees required to complete the transfer, the executor will need to submit these documents to the transfer agent for processing. If all is in order, the shares will be transferred as instructed on the Securities Transfer Form. If there is a discrepancy, the transfer agent will contact the executor to correct. There is a nominal fee if the documents are being returned for correction.
Rather than continuing to hold physical share certificates, the transfer agent can be directed to transfer the shareholdings to the DRS System, thereby eliminating the risk of loss, damage or destruction of share certificates.
Physical share certificates may be far less common than they used to be, but it is good practice to understand what is needed to complete such a transfer.
In order to reduce costs to an estate, it is also good practice to remind our clients to keep organized records for their executors to avoid the extra steps involved when dealing with lost certificates
 This will also include shares held by a transfer agent in the DRS System.