Transfer and transmission of shares are two distinct processes in the realm of corporate ownership, each occurring under different circumstances and serving unique purposes.
Transmission of Shares
Transmission refers to the process by which legal heirs or beneficiaries claim ownership of shares after the death of a shareholder. This event is involuntary and is triggered by the demise of the shareholder. In such cases, the ownership of shares is passed on to the legal heirs through inheritance, as specified in the deceased shareholder’s will or as per legal inheritance laws.
| Particulars | Transmission of Shares | Transfer of Shares |
|---|---|---|
| Type of Transfer | Involuntary Transfer of ownership | Voluntary transfer of ownership |
| Processed By | Legal Heir or Receiver | Transferor or Transferee |
| Consideration | No consideration is required in case of transmission of shares | Transferee is required to pay consideration to transferor in respect of the shares transferred. |
| Liability | The transferor’s obligations are discharged | Shareholders’ original obligation is still in effect |
| Transfer Deed and Stamp Duty | No execution of a valid transfer deed is required and hence no stamp duty is payable. Stamp duty is payable on such transfer of shares. | A valid deed at the time of share transfer is executed; hence, stamp duty is payable on such transfer of shares. |
What provisions need to be met when applying for the transfer or transmission of shares?
When applying for the transfer or transmission of shares, several provisions must be considered to ensure the process is carried out correctly. Here are some key provisions typically involved:
- Adhere to the company’s Articles of Association.
- Ensure compliance with stamp duty regulations.
- Complete and stamp the transfer deed.
- Obtain board of directors’ consent if required.
- Review any shareholder agreement terms.
- Complete all necessary documentation accurately.
- Provide additional documents for share transmission, if applicable.
- Comply with regulatory requirements.
- Ensure payment of any consideration.
- Maintain proper record-keeping.
What documents are necessary for the transfer or transmission of shares?
The documents required for the transfer or transmission of shares typically include:
Transfer Deed: A legal document used to transfer ownership of shares from one party to another.
Share Transfer Form: A form provided by the company or stock exchange that details the transfer of shares.
Share Certificate: The certificate representing ownership of the shares being transferred.
Board Resolution: If required by the company’s Articles of Association or shareholder agreement, a resolution approving the transfer may be necessary.
Death Certificate (for transmission due to death): If the transfer is due to the death of a shareholder, documentation proving the death may be required.
Probate or Letters of Administration (for transmission due to death): Legal documents establishing the right of the transferee to inherit the shares.
Stamp Duty Payment: Depending on the jurisdiction, stamp duty may need to be paid on the transfer of shares.
Any other documents required by regulatory authorities or specific to the circumstances of the transfer.
It’s essential to verify the specific requirements with the company, legal advisors, or relevant regulatory authorities to ensure all necessary documentation is provided and procedures are followed correctly.
Key points regarding transmission of shares:
Involuntary Nature :
Transmission is not within the control of the shareholder; it is a consequence of the shareholder’s death
No Consideration Involved :
Unlike transfers, there is typically no consideration or payment involved in the transmission process. The transfer occurs by operation of law.
Legal Heirs :
The shares are transmitted to the legal heirs based on the deceased shareholder’s will or legal succession laws. The claimant must prove his/her right to claim the ownership of the shares after the demise of the original shareholder.
Transfer of Shares :
Transfer of shares, on the other hand, is a voluntary and consensual process that occurs during the shareholder’s lifetime. This involves the sale, gifting, or pledging of shares to another party. Shareholders can transfer their ownership to another individual or entity through a process defined by the company’s articles of association and regulatory guidelines.
Key points regarding transfer of shares :
Voluntary Process :
Transfer of shares is a voluntary act initiated by the shareholder. It may occur for various reasons, such as the need for liquidity, change in ownership structure, or financial planning.
Consideration Involved :
In most cases, there is a consideration (payment) involved in the transfer of shares. This consideration can be in the form of cash, assets, or other agreed-upon terms between the parties involved.
In summary, while transmission of shares is a process that occurs upon the death of a shareholder, transfer of shares is a deliberate and voluntary action undertaken during the shareholder’s lifetime. Transmission involves the legal heirs, and it happens without any consideration, whereas transfer involves the active participation of the shareholder and often includes a consideration for the transfer of ownership.
