What happens to your shares when you die? Demat transmission in Nepal

When my friend's father died, the family inventory was the usual one: the house, the bank account, an FD nobody had mentioned. Then someone remembered the share account. Years of applying for IPOs had left a Mero Share login holding a few hundred kitta across a dozen companies. The password was written inside an old diary, so the account opened fine.

The instinct was to log in, sell everything, and split the cash. That instinct is wrong, and acting on it can turn a clean inheritance into a problem. You cannot sell a dead person's shares from their account. The holding has to move into an heir's own demat first, by a specific legal process, before a single kitta can be sold. That process is called transmission, and most families meet it for the first time at the worst possible moment.

Transmission is not a transfer, and not a sale

The vocabulary matters here because it maps to three very different things.

A sale is a voluntary market trade: you sell your shares through a broker, settled in a couple of days, and you pay capital gains tax. A transfer while alive (a gift of shares to family, for instance) is an off-market name change. Transmission is neither. It is the involuntary movement of a holding by operation of law because the owner has died, and it can only go to the legal heir.

This is why logging into the deceased's Mero Share and selling is the wrong move. The account belongs to a person who no longer exists; the shares legally belong to the heirs the moment of death, and Nepali law routes them through transmission, not through the dead account's sell button. The Companies Act 2063 recognises that on a shareholder's death the heir acquires the shareholder's rights, and sends genuine disputes over who that heir is to the courts. Off-market name changes of shares in Nepal are, in fact, restricted to exactly these two situations: family transfer and death transmission.

The process, step by step

SEBON authorised CDSC to handle death transmission so families deal with their own bank or broker instead of chasing NEPSE in Kathmandu. The flow has five stages:

1. The heir applies to the DP. You go to the Depository Participant, the bank or broker that holds the deceased's demat account, and submit the Transmission Request Form (TRF) with the supporting documents.
2. The DP verifies and enters it into the system. It checks the documents and records the request in CDSC's system.
3. The DP submits the details to CDSC.
4. CDSC verifies and completes the transfer into the heir's demat account.
5. The public objection notice. For a death claim, CDSC publishes a notice naming the deceased and giving related parties a window to register any competing claim before the transfer is finalised.

That last step is not a formality buried in a bylaw. CDSC runs a live, public death-notice register, where each notice lists the deceased's name and lineage and an ending date roughly 35 days after publication. Until that window closes with no valid objection, the shares don't move. It exists to stop one heir quietly transmitting shares over the heads of the others.

The documents you need

The document set mirrors the rest of a Nepali estate claim, which is the one efficiency available to a grieving family: gather the core papers once and reuse them across the bank, the FD, the PF, and the shares.

Document	Notes
Death registration certificate (attested)	From the ward office; proves the death
Citizenship of the deceased (attested)	Identifies the account holder
Citizenship of the heir (attested)	Identifies who receives the shares
Relationship certificate, नाता प्रमाणित (attested)	The master key; proves you're a legal heir
Consent / no-objection of other heirs	Stops one heir claiming over the others

The relationship certificate is the pivot, exactly as it is for claiming bank accounts, PF, and insurance. An uncontested one comes from the ward in a day or two. A contested lineage goes to the district court, and that fork decides whether transmission takes weeks or years.

When it goes to court: the Hakwala route

The consent-of-heirs route works when the family agrees. When it doesn't, or when there's no obvious single successor, the shares can only move on a court decision establishing the rightful heir, the हकवाला. In that case the court-recognised successor's documents attach to the TRF, and the DP transmits the shares into that person's name on the strength of the court order. This is the same court process that resolves a disputed land or bank claim; shares don't get a special shortcut around a family fight.

The nominee facility almost nobody uses

Here is the prevention that's worth more than the whole process above. Contrary to a common belief that Nepali demat accounts have no nominee option, CDSC accounts do carry a nomination facility, and CDSC explicitly advises sole account holders to appoint one.

A named nominee turns the transmission from a multi-party documentation exercise into a far simpler claim. What a nominee is not, though, is a way to disinherit the other heirs. In the same way a bank nominee is widely treated as receiving the money on behalf of the estate rather than as its absolute owner, a demat nominee is best understood as the person who receives the shares on behalf of the legal heirs. Naming one speeds the mechanics; it doesn't rewrite who legally inherits. The practical instruction is still simple: if you hold a demat account, log in and set a nominee. It costs nothing and saves your family the hardest version of this.

The physical-certificate trap

The painful cases almost always involve paper. Dematerialisation has been mandatory since Magh 2072, and physical certificates can't be traded or transmitted directly through a DP. If the deceased left old share certificates that were never dematerialised, the heirs generally have to dematerialise them first, routed through a DP and the issuing company's share registrar, before the holding can be transmitted.

That extra leg, company by company, registrar by registrar, is exactly the headache the Mero Share and demat post argues for clearing while the owner is alive. A holding that's already in demat transmits through one DP. A drawer of paper certificates becomes a separate errand for each company that issued them.

The tax: nothing now, capital gains later

Good news first: there is no tax at the moment of inheritance. Receiving shares on death is not a taxable disposal in Nepal, the same way inherited money and land aren't taxed when you receive them. No windfall tax, no estate duty, nothing on transmission itself.

The tax waits for the sale. When the heir eventually sells the transmitted shares, capital gains tax on listed shares applies at the usual individual rates: 5% if the shares were held more than 365 days, 7.5% if a year or less, withheld at the point of sale. The wrinkle is the cost basis, the figure the gain is measured against. Sources differ on whether an heir's basis is the deceased's original purchase cost or the value at the time of inheritance, and the broker's system may apply its own recorded average cost when it withholds at sale, which can over- or under-tax a transmitted holding. This is the one number worth checking with a practitioner before selling a large inherited block, because it directly sizes the tax.

Unclaimed dividends and dormant accounts

Two loose ends families miss. A deceased investor often has dividends sitting unclaimed, and sometimes a demat account quietly going dormant.

For unclaimed dividends, the money sits earmarked at the issuing company's share registrar, and the heir recovers it from that registrar, with the same heirship documents, after the shares are transmitted. The clock matters more than families expect. Under Section 182(9) of the Companies Act 2063, a dividend left unclaimed for five years after the general meeting that approved it is transferred to the Investor Protection Fund under Section 183, after one final newspaper notice, and the Act gives no clear route to pull it back out afterward. The Indian "seven-year" figure that a lot of online guidance repeats is wrong for Nepal, but not because there's no fund: Nepal's deadline is five years, and the fund is its own, run under the Companies Act. So claim a deceased relative's dividends sooner rather than later. The per-registrar recovery route, and the BOID lookups that surface this money, are in the unclaimed-dividend post.

What you actually need to know

Three things.

1. You can't sell a dead person's shares; you transmit them. The holding moves to the heir's own demat through the DP and CDSC, with a death certificate, relationship certificate, citizenships, and the other heirs' consent, and only after a 35-day public objection window.
2. A nominee is the cheap insurance. CDSC accounts allow nomination, and a named nominee turns transmission from a documentation marathon into a simple claim. It speeds the process without overriding who legally inherits, so there's no reason not to set one.
3. No tax to inherit, capital gains tax to sell. Transmission itself is tax-free. The 5% / 7.5% capital gains tax bites when the heir sells, and the cost basis on a transmitted holding is worth confirming before a big sale.

If you're untangling a deceased relative's demat account, or just want to set up your own holdings so your family never has to read this post, email parjanya57@gmail.com with the broad shape of the situation.

This post is part of the Nepal Money Basics guide — the investing section.