Business Recorder
LAHORE: The Lahore High Court (LHC) has held that succession certificate determines entitlement of the legal heirs of the deceased vis-à-vis movable assets including shares and securities. The court observed that the shares or other securities of a deceased member shall be transferred upon an application duly supported either by a succession certificate or by a lawful award, in favour of the successors to the extent of their respective shares and interests. The court said, Section 78 of the Companies Act is not a mere procedural formality rather it serves the substantive purpose of judicially determining entitlement of the legal heirs. Any incorporation of names of the legal heirs in the shareholders’ register, provision of succession certificate protect the company from exposure to conflicting claims, multiplicity of proceedings, and future litigation, the court added. The court said, without fulfilment of the statutory requirements contemplated under the Act would not only be against the mandate of law but may also prejudice the rights of other claimants, if any, whose entitlement is yet to be finally determined by the competent court of jurisdiction. The court passed this order in a petition of Sultana Tajammal challenging the decision of board of directors of the respondent company which transferred and registered shares of one of its director and the petitioner’s deceased mother Begum Parveen Hameed to her legal heirs. The court disposed of the petition and observed that the impugned resolution, as well as the incorporation of the names of the petitioner and respondents in the shareholders’ register as legal heirs of the deceased shall remain in field for the limited purpose of distribution of dividend, subject to the litigation pending inter se the parties. The court said that the aforesaid litigation, unequivocally demonstrates that the question regarding succession, title and entitlement to the shares of the deceased is still subjudice before the judicial fora and remains unresolved. Therefore, the same will be required to be read strictly in the context of limited relief sought in the said applications, the court added. The court said such insertion in the register of members neither dispenses with nor substitutes the mandatory legal requirement of production of a succession certificate or lawful award, which can indeed be passed in the pending litigation inter se the parties. The court said it is a settled principle that any interim arrangement made for distribution of dividend during the pendency of proceedings yet to attain final adjudication by a court of competent jurisdiction, neither confers any proprietary or vested rights upon the parties nor operates as res-judicata with regard to the question of title, succession or entitlement to shares. The board, while exercising powers relating to maintenance and rectification of the register of members, acts in a fiduciary and quasi-administrative capacity and it is neither vested with jurisdiction to determine disputed questions of inheritance nor empowered to adjudicate competing proprietary claims inter se the legal heirs in absence of lawful succession documentation, the court concluded. Copyright Business Recorder, 2026
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