What is Transmission of Shares? | Physical Share Solutions

What does Transmission of shares mean? in Physical Shares

While the transfer of shares relates to a voluntary act of the shareholder, transmission is brought about by operation of law. The word ‘transmission’ means devolution of title to shares otherwise than by transfer, for example, devolution by death, succession, inheritance, bankruptcy, marriage, etc.

While the transfer of shares is brought about by delivery of a proper instrument of transfer (viz, transfer deed) duly stamped and executed, transmission of shares is done by forwarding the necessary documents (such as a notarized copy of death certificate) to the company.

On registration of the transmission of shares, the person entitled to transmission of shares becomes the shareholder of the company and is entitled to all rights and subject to all liabilities as such shareholder.

When Does Transmission of Shares Take Place

  • The deceased’s account has no holdings and no funds
  • A joint account holder exists
  • The account holder has appointed a nominee
  • The account holder has not added a nominee to their account but has holdings.
  • -Holding value less than 5lakhs
  • -Holding value more than 5lakhs

Each scenario has different procedures that need to be followed.

  • Transmission of shares is a process by operation of law where under the Shares are registered in a Company in the name of deceased person or an insolvent person are registered in the name of his legal heirs by the Company on proof of death or insolvency as the case may be.
  • Article of the Company usually provide the provisions of Transmission of shares. In absence of such provisions, Company will follow Regulations 23 to 27 of Table F to govern the provision of Transmission of shares.
  • Transmission of shares takes place when registered member dies or is adjudicated insolvent or lunatic by competent court.
  • As per the above regulations, legal representatives are entitled to the shares held by the deceased person and company must accept the evidence of Succession.

Essential Aspects of Transmission of Shares:

  1. Generally, the provisions of transmission of shares are provided in the Articles of Association (AoA) of the Company. In absence of such provisions, the Company would then follow regulations 23 to 27 of Table F of Companies Act, 2013.
  2. As per the governing regulations, legal representatives are entitled to the shares held by such registered members and the Company must accept the evidence of succession.
  3. Succession Certificate or Letter of Administration or Probate or Evidence acquired by the Board of Directors can be accepted as evidence of succession. If the succession certificates have been granted in respect of shares, the Company should not insist on providing probate or letter of administration.
  4. The legal heirs/representatives are the legal owners of the shares and are entitled to get dividends and other advantages to which they would be entitled if they were the registered holders of the Shares. However, they would not be entitled to exercise voting rights or other rights in a general meeting unless they have registered themselves as a member in respect of the Shares. They may apply to be registered members of the Company.
  5. Legal heirs are also allowed to transfer the shares as likely as the deceased or insolvent member would have done.
  6. Since it is a process by operation of law, shares are transmitted to legal heirs without any consideration and thus do not attract any stamp duty.
  7. There is no necessity to have an instrument of Transfer (‘Deed’) executed for the purpose of transmission of shares.
  8. Shares would continue to be subject to the original liabilities, even in case of their transmission. For an instance, if some lien existed on the shares for any sum due, on their transmission such lien would subsist.

Transmission in Case of Small Shareholding:

The Company may affect transmission without obtaining a succession certificate. However, the Board shall ensure that sufficient evidence is produced by the legal heirs.

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