Transfer and transmission of shares is an act by the shareholders and it generally takes place through a contract. Share transmission also takes place in case of the death of the shareholders or any events where the shareholder becomes insolvent or unsound.
What is share transfer?
Transfer of shares refers to the intended transfer of the share from the transferor to the transferee. A public company’s shares are transferable until and unless the company has got a valid reason to disallow the same matter. A transfer deed is implemented for the share transfer.
What is the transmission of shares?
Transmission of shares refers to the operations of law under which the shareholder is no more insolvent. It takes place when the shareholder is an organization that has wound up.
No transfer deed is executed in the transmission of shares. The transferee is allowed to be given the rights to shares and they have to give proof of entitlement to the shares.
Difference Between Transfer and Transmission of Shares
Transfer of shares is a voluntary act whereas transmission of shares is operated by a law. Transfer of share is initiated by a transferor and a transferee and it is a deliberate act of parties. On the other hand, the transmission of shares is initiated by a legal receiver.
There is no consideration in the transfer of shares and there is a consideration in the transmission of shares. A transfer deed is a must in the transfer of shares and it is not compulsory in the transmission of shares.
Under the Companies Act 2013, transfer of shares will affect only when a paper instrument of transfer is duly stamped, dated as well as executed by the transferor and the transferee. It must have all the details such as name, address, occupation and so on.
Transmission of shares will affect only when the application of transmission as well as the relevant document is valid. As we know, execution of transfer deed is not needed in transmission of shares.
The documents of transmission of shares are as follows:
- Copy of death certificate
- Copy of pan card
- Letter of Administration or succession certificate, it can also be a probate of will or a court decree
- signature of the successor
Penalty
In case of any non-compliance, you have to bear a penalty. A company shall be punishable with Rs. 25000 if any default is made while complying. This amount can be extended to Rs. 50000 or even 1lakhs.
The liability of transfer of shares is ceased on completion of the transfer whereas the original liability continues to exist in case of transmission of shares. Death, insolvency, bankruptcy, lunacy are the main reasons for the transmission of shares while the transfer of shares is done intentionally.
Time Limitation
Every organization is bound to deliver the certificates within 1 month from the date of receipt. In case of transmission of shares, a company has to deliver all the certificates within 60 days from the date of receipt.
Shares are held in the Demat account from the lodged date of the Transmission Request Form. This transmission request form is listed by companies.
Formalities
Under section 56, all formalities have to be observed while transferring the shares. In case of transmission of shares, no such formalities are needed. Transfer of shares is impermissible whereas transmission of shares is permissible.
It is compulsory to have an instrument of title be executed by both the transferor and the transferee. While it is not necessary to have an instrument of title in case of transmission of shares.
Parties involved in the transfer of shares are a listed company, a transferor and a transferee. In the transmission of shares, the death certificate of the owner must be given as a reference number.
Summing Up
Transfer and transmission of shares are two different things. Often people consider both as the same thing. Transfer of shares is very common and it is just a normal course of transfer of shares from the transferor to the transferee. It is intentional. Transmission of shares takes place when the shareholder is insolvent or unsound. It takes place only on the occurrence of certain events.