All you need to know about Procedure of Transmission of Shares in India

One of the crucial features of the Private Limited Company or a Limited Company is the free transferability of ownership. The Transfer of shares is a voluntary act by the parties, and after transfer, the ownership of the shares is transferred from the transferor to the transferee, whereas the Transmission of shares means transmission of shares by operation of law.

In case of transmission of shares, no consideration is required under the Companies Act 2013, the transfer of shares in a private limited company is subject to some restrictions. For transfer of shares, a transferor has to execute a valid deed in favor of transferee, and the liability of the transferor ceases.

In this blog, we will discuss the concept of Transmission of Equity Shares, together with its procedure and how it is different from the Transfer of Equity Shares.

Concept of Transmission of Equity Shares

The term “Transmission of Shares” denotes a process under which the title over the shares is transferred by the operation of law. Further, the term “Operation of Law” includes the following:

• Death of a member;
• In the case of a Joint Holding, transmission happens only when the last Surviving Member Dies;
• When a Member has been Adjudicated Insolvent;
• When a Member has been Declared Mentally Ill (Lunatic);
• When a Company has been Amalgamated and Fresh Shares have been issued by the New Company;
• When the Member is a Company and it has been merged with other company or goes into liquidation
• When shares are being by the legal guardian for the benefit of a minor, till the time he/she becomes a major;
• By the order of the Court;
• By the order passed as Arbitration Award;

Further, this process is initiated by the receiver or legal heir of the deceased person and does not include any transfer deed. Moreover, there is no need to have a clause of adequate consideration under this contract.

However, it shall be relevant to note that the original liability on the shares continues to exist even after the completion of the process of transmission of shares, and there is no need to pay any stamp duty as well.

Basic Procedure for the Transmission of Share

Following steps shall be followed for the transmission of shares

• In the case of joint holding or legal heir, the survivor who wants transmission by operation of law needs to file a simple application with the company. Relevant documents such as Death certificate, succession Certificate, probate, etc. need to be attached to the application.
• Thereafter, the company records the information about the death certificate, and a reference number of recording is given to the shareholder.
• After the documents are submitted, the company reviews these documents and approve the transmission request in case the documents are in order.
• In case the documents submitted with the transmission request are not in order, the company shall communicate refusal to the concerned person within 30 days.
• Before the death of the shareholder, the dividend declared will be payable to the legal representative, and in case after the death of the shareholder, the dividend will be paid to him only after the registration of his/her name.

Document required for transmission of shares

The procedure of transmission of shares requires following documents to be submitted-

1. Shares held in Demat account
If the shares are in demat account then the survivor needs to submit following documents-

• Transmission Request Form(TRF)
• Affidavit on 100/- stamp paper for claiming the legal heir of the beneficial owner
• Notarized copy of the death certificate
• Indemnity deed on 500/- indemnifying both, the depository and Depository Participants (DP)
• NOC From legal heirs
• Family settlement deed duly executed by all legal heirs of the deceased beneficial owner

Note: If the value is more than Rs 2 lacs the Depository Participants (DP) may insist to submit more documents apart from above as below

• Succession certificate
• Probated will
• Surety Form

2. Shares held in Physical Form
In case if shares are in physical form the Share transfer agent any ask following documents to submit in procedure for transmission of shares-

• Transmission Request Form(TRF)
• Notarized copy of the death certificate
• Original Share Certificates
• Succession certificate
• Probate or letter preferably notarized

Difference between Transfer of Equity Shares and Transmission of Equity Shares

 Takeaway

 In a nutshell, “Transmission of Shares” denotes a process under which the title over the shares is transferred by the operation of law. However, it will take place only when the registered member of the company has died, declared insolvent or lunatic by the court of competent law.

Further, in case of any other doubt and dilemma, reach out to Legal Window,our experts will not only give a lucid and clear understanding but will assist you in the process of Transmission of Equity Shares as well.