First holder
The first-named holder of a joint demat account: all communications, dividend and interest warrants, annual reports and meeting notices go to them, though beneficial ownership vests in all joint holders.
In plain language
A demat account can have more than one holder. The system still needs one name to write to, and that is the first holder.
The rule in Chapter 5 is short. Beneficial ownership of jointly held securities vests in all the joint holders. But communications about the account go only to the first holder, and dividend and interest warrants, annual reports and notices for meetings are issued to the first-named joint holder only.
So being first is about correspondence and administration, not a bigger claim to ownership. The second and third holders are beneficial owners too. They simply do not get the post.
The first holder's identity has other consequences too. It decides the account's category when an individual and a body corporate hold jointly, and it decides eligibility for a Basic Services Demat Account.
How it works
Account opening (Chapter 4).
| Requirement | First holder | Other joint holders |
|---|---|---|
| Separate KYC Application Form | Yes | Yes, one each (and one for a guardian if the sole holder is a minor) |
| Proof of identity | Yes | Yes |
| Proof of address | Correspondence and permanent, where they differ | Permanent address only |
| PAN | Compulsory | Compulsory |
A demat account can have a maximum of three holders. All joint holders sign the application and acknowledge the Rights and Obligations document.
Operation (Chapter 5, 5.2). Communications, warrants, annual reports and meeting notices go to the first holder.
Death of a joint holder. On request, the surviving holders can have the balance transmitted to a new account they open, after which the old account is closed. Alternatively they can continue the existing account by deleting the deceased holder's name. For that they apply in the specified form with a death certificate attested by a Notary Public or a Gazetted Officer.
Individual plus body corporate (5.2.1). If the first holder is an individual, the account is opened in the individual category. If the first holder is a body corporate, the account type is Body Corporate. Because a body corporate is a joint holder, nomination is not available.
Four or more holders (Chapters 5 and 7). The main beneficial owner is entered in the first holder's field, and the remaining names are fitted into the second and third holder fields, with an annexure for the rest. The account can take no credits other than dematerialisation, bonus, rights and preferential offers. After dematerialisation, the securities move to a new account of at most three holders and the old one is closed. A trust with four or more trustees can use the procedure without the credit restriction.
BSDA (Chapter 5). The individual must be the sole or first holder and have only one BSDA across all depositories.
easiest (Chapter 5). A sole holder does not submit a registration form to the DP. Joint holders must submit a duly signed registration form.
A worked example
Illustrative family and figures.
Anil, Sunita and Rohan Kulkarni of Pune open a joint demat account, in that order, and hold 800 shares. The company declares a dividend of Rs 15 per share.
| Item | Who receives it |
|---|---|
| Dividend of 800 x 15 = Rs 12,000 (or the warrant) | Issued to the first-named holder, Anil |
| Annual report and AGM notice | Anil |
| Account communications from the DP | Anil |
| Beneficial ownership of the 800 shares | All three jointly |
At account opening, Anil's correspondence address is his Bengaluru flat and his permanent address is in Pune. He gives proof of both. Sunita and Rohan give proof of permanent address only. All three give PAN.
Later, Anil dies. Sunita and Rohan can either:
- open a new account in their names and have the 800 shares (then worth, say, Rs 9,60,000 at Rs 1,200 each) transmitted to it, closing the old account; or
- apply in the specified form, with a death certificate attested by a Notary Public or Gazetted Officer, to delete Anil's name and continue the old account.
A different family: four siblings inherit share certificates in four names. The DP enters the eldest as first holder, the next two in the second and third holder fields, and the fourth on an annexure. The account is then used only to dematerialise, and the shares move to a new account with at most three holders.
Why NISM asks about it
Chapter 4 (Functions of DP - Account opening, 12% weightage) covers the KYC and address-proof rules for the first holder versus joint holders. Chapter 5 (Account operations, 3%) states the core rule on communications and warrants, the individual-plus-body-corporate category rule and the BSDA condition. Chapter 7 (Dematerialisation, 9%) covers certificates held in more than three names. Expect "to whom are dividend warrants sent in a joint account?" and "what address proof is needed from joint holders?"
Common exam traps
- First holder gets the post, not a bigger stake. Beneficial ownership vests in all joint holders.
- Maximum three holders in the account opening module. Four or more need the special restricted procedure.
- Address proof differs. Correspondence and permanent address for the first holder (where different); permanent only for joint holders.
- PAN is compulsory for all holders, not only the first.
- The first holder decides the category. An individual first holder gives an individual-category account; a body corporate first holder gives a Body Corporate account.
- No nomination where a body corporate is a joint holder.
- Deletion is now an option. Survivors need not open a new account; they can delete the deceased holder's name from the existing one.
- BSDA needs a sole or first holder. Being second holder in someone else's account does not count.
Where this is taught
Free preparation for NISM Series VIRelated terms
- Beneficial ownerThe investor who owns dematerialised securities for every practical purpose — the depository is the registered owner on the company's books, but the dividends, bonus, rights and votes are the investor's.
- Minor becoming majorThe change of status in a folio held in a minor's name when the minor turns 18 — the new major completes PAN, KYC and bank updates, and no transactions are allowed until the AMC's records show the change.
- NominationThe account holder's written direction naming who receives the securities on death — up to ten nominees for a demat account, with percentages that must total 100, mandatory for single holdings.
- Basic Services Demat AccountA low-cost demat account for a small investor who holds only one demat account and whose holdings stay within Rs 2 lakh of debt and Rs 2 lakh of non-debt securities — its annual charge can be nil.
- easiestCDSL's internet facility (Electronic Access to Securities Information and Execution of Secured Transaction) through which BOs and CMs submit debits, credits, freezes, pledges and confiscations.
- Registered ownerThe depository itself, recorded in the issuer's books as the holder of dematerialised securities — while the investor, recorded by the depository as Beneficial Owner, retains all the actual rights and benefits.
- Beneficial owner accountThe ownership demat account investors open with a DP to hold and trade securities in electronic form, distinct from a broker's clearing member account, which only holds securities in transit.
- Four-or-more-holder accountA special-procedure demat account for four or more joint holders of the same physical certificate, opened only to dematerialise the holding, restricted from crediting instructions, and closed once demat is complete.
- Deletion of nameRemoving a deceased joint holder's name from a demat account so the surviving holders can continue the same account, instead of opening a new one, provided the request reaches the DP within 365 days of death.
- Family Settlement DeedA deed dividing a deceased investor's property among family, accepted by a DP as a faster transmission route for securities up to Rs 15 lakh when a Will or succession certificate is unavailable.
- Indivisible securities ruleWhen a nominated percentage split cannot be exactly divided at the ISIN level among multiple nominees, the DP divides what is divisible and gives the remaining indivisible securities to the nominee named first.
- Ten-nominee ruleThe cap of ten nominees a demat account holder may name for a single-holding account, each given a percentage share of the securities that must together add up to 100 percent.