Companies Act Section 72

Companies Act Section 72: Power to Nominate

Overview of Section 72

Section 72 of the Companies Act addresses the important aspect of nomination rights concerning the holders of securities in a company. 

This provision facilitates the smooth transfer of securities upon the death of a holder or joint holders, ensuring that the rights associated with such securities are appropriately vested in a nominated individual. 

The section delineates the procedures for making nominations, the implications of such nominations, and the rights of nominees, thereby providing clarity and legal certainty in the management of securities within companies.

Key Provisions of Section 72

1. Right to Nominate

Nomination by Individual Holders: 

Every individual holding securities in a company has the right to nominate a person of their choosing at any time. 

This nomination must be made in a prescribed manner, which typically involves completing specific forms or documentation as set out by the regulatory authorities. 

The ability to nominate ensures that the holder's interests are protected and allows for a seamless transition of rights upon their death.

2. Joint Holders and Nomination

Nomination by Joint Holders: 

In instances where securities are held jointly by multiple individuals, all joint holders collectively have the authority to nominate a person who will inherit all rights in the securities in the event of the death of all joint holders. 

This provision recognizes the unique nature of joint ownership and ensures that the interests of all parties involved are accounted for.

3. Effect of Nomination on Rights to Securities

Entitlement of the Nominee: 

Notwithstanding any other laws or legal dispositions, whether testamentary (relating to a will) or otherwise, a valid nomination made in accordance with the prescribed procedure confers upon the nominee the right to claim the securities upon the death of the holder or joint holders. 

This entitlement excludes all other individuals, meaning that the nominee becomes the sole individual entitled to the rights associated with the securities.  

Exclusivity of Rights: 

The rights conferred upon the nominee are comprehensive, granting them full access to the benefits of the securities. 

This provision simplifies the legal transfer process and reduces potential disputes among heirs or other claimants, as the nominee's rights are clearly established unless the nomination is changed or revoked according to the prescribed methods.

4. Provisions for Minor Nominees

Nomination in Favor of Minors: 

In cases where the nominee is a minor (an individual who has not yet reached the legal age of majority), the original holder of the securities has the authority to designate another person to be entitled to the securities. 

This appointment must also be made in the prescribed manner and ensures that there is a clear successor for the securities in the unfortunate event of the nominee's death while still a minor. 

This provision is vital for protecting the interests of minors and ensuring they are not left without representation in matters concerning their inherited securities.