QUESTION: I have been trying to get information about transferring shares between relatives (strictly transfer – no buy/sell sale involved). I invested in three companies back in the late 1990s and currently hold paper share certificates with them that are listed on the JSE. For one of the three companies (Ciboney), I am not sure if it is still listed. I do not have a brokerage account and did not convert these paper shares to digital format. I no longer want to hold these shares but transfer them to a younger relative (my nephew) as a source of long-term investment for him. I do not want to “sell” the shares to my relative. I just want a straight transfer from me to him.
Here are my questions: Is there a specific process that can be used for a straight transfer of shares (no buying and selling) between relatives or related parties? I am going to assume that I cannot transfer the shares in paper format. Is this assumption correct? I am also going to assume that my relative will need to open an account with a brokerage house to receive any shares transferred. Would my relative still need to fund the account prior to receiving any share transfer? Or would the share transfer serve as a source of funding? I do not want to maintain ownership of the shares and do not wish to sell them to my relative. Just a straight transfer and be done with them. If this is allowed, will I still need to open a brokerage account since I have no plans to be an investor?
FINANCIAL ADVISER: The three stocks that you want to pass on to your nephew, being listed securities, are to be transferred through the Jamaica Stock Exchange. The transactions will result in the change of beneficial ownership, so they have to be done as normal trades.
You and your nephew will be required to open accounts with a stockbroker and the Jamaica Central Securities Depository. Although no funds will pass between you and the beneficiary, the charges due to the broker, the Government, and the stock exchange will have to be paid by both of you, being the transferor and the transferee, respectively.
Nonetheless, the broker will ensure that all the shares go to your nephew. It may require more than one trade for each security.
The first step in the process is to open an account at the selected stockbroking company. You must have an account to be able to do the transaction. Both of you will be required to complete the necessary forms and present the following: proof of identification, such as a current passport or driver’s licence; Tax Registration Number (TRN); proof of address, such as a utility bill, a bank statement, or credit card statement; proof of source of initial deposit, for which the portfolio of securities you intend to transfer is adequate, according to a stockbroker; and proof of source of income, such as your last three months’ pay slips or last six months’ bank statement. After this, the stockbroker will act for you and your nephew in opening your accounts with the JCSD.
Your assumption that you cannot transfer the shares in paper format is correct. This is why you need the JCSD account to which the broker will transfer them so that they can be put into electronic form or dematerialised. It will take four to six weeks for this part of the process to be completed according to the stockbroker I discussed the matter with, after which the transaction can be done on the JSE, followed by the transfer of the shares to your nephew two business days after the execution of the trade.
Each party will be required to pay the broker’s commission, JSE cess, and general consumption tax amounting to about 2.75 per cent of the value of the shares on each side of the transaction.
The fact that the market is soft is to the advantage of you and your nephew in the sense that relatively low prices mean relatively low charges. Additional good news is that Ciboney is still listed on the JSE and it actually trades, the last closing price being $1.21 on Friday.
I like that you are engaging in estate planning and hope that you are also paying attention to other aspects of it. It is important to have an effective estate plan. It makes life easier for the parties concerned, reduces the risk of squabbles and family tension, saves time and money, and generally ensures that who you want to get your assets get them.
Oran A. Hall, author of Understanding Investments and principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and firstname.lastname@example.org