Transmission of Shares

What is Transmission?

The process of transferring ownership of shares from one individual to another, usually as a result of a shareholder’s passing, is referred to as the transmission of shares.

A corporation may register securities by legal operation upon obtaining notification from any person to whom a right to register securities has been transmitted, as per Section 56 of the Companies Act of 2013.

The phrases “transmission” and “transfer of shares,” which are frequently used in relation to financial securities, are frequently confused by the general public.

 

Difference between the Transfer & Transmission of Shares?

Transfer of Shares: Share transfers occur when shares are voluntarily sold or moved from one shareholder to another. In this transaction, the shares’ owner (transferor) gives those shares’ ownership to the recipient (transferee).
Transmission of Shares: In accordance with current inheritance rules, the transfer of shares takes place automatically when a shareholder passes away. The act of transfer is not voluntary; rather, it is regulated by national laws.

 

Process for transmission of shares

A succession certificate, probate of will, or letter of administration on behalf of the lawful heirs must be obtained from the courts once the value of shares in any one firm surpasses 5 lakhs. Legal heir/surviving member certifications and NOCs from all legal heirs stating no objection to the transmission are needed for shares valued up to Rs. 5 lakhs.

Probate of Will: Probate of will is the legal procedure used to establish the validity of a decedent’s last wishes. A will is a legal document that specifies how an individual’s assets and estate will be distributed following their passing. The procedure of probate entails.

Succession certificate: In the event that a person passes away intestate, or without leaving a will, a succession certificate becomes relevant. It is a legal document that gives the bearer the authority to act on behalf of the deceased to pursue securities and debts owed to him or payable in his honor. This document is the primary method by which the heirs can make an assertion regarding the estate’s assets in the event that a will is absent. Applying for a succession certificate should be done through a district or high court.

LOA (Letter of Administration):  A Letter of Administration, or LOA, is a legal document that a competent court issues to give someone the authority to manage the estate of a deceased person who passed away without leaving a will. This type of estate administration is known as intestate. The Indian Succession Act of 1925 governs the procedure.
The legal procedure is different if the deceased left a will, and the executor specified in the will may be granted “Probate” by the court. The court may issue Letters of Administration with the will attached if no executor is named or if the executor who is named is unable or unwilling to carry out their duties.

Legal heir certificate or surviving member certificate:  To identify a deceased person’s lawful heirs or successors, the appropriate legal authorities issue these certificates. To enable the transfer of assets, properties, and other rights from the deceased person to their legitimate heirs, it is necessary to obtain this kind of certificate. For the following purposes, a legal heir certificate may be obtained: government schemes and subsidies, bank account closure, employment benefits, insurance claims, pension claims, inheritance and succession, transfer of property, insurance claims, government schemes and subsidies, and debt and liability settlement.

 

The steps and documents required for the transmission of shares are:

1. Obtain a Death Certificate: Getting the deceased shareholder’s death certificate is the first step. This document is necessary to start the transmission process and acts as proof of death.

2. Identify Legal Heirs or Beneficiaries: Determine who is entitled to the shares as a legal heir or beneficiary. Obtaining legal heir certificates or other pertinent paperwork from the government may be necessary to accomplish this.

3. Contact with the Registrar and Transfer Agent (RTA) of the Company: Notify the company whose shares are being transferred of the shareholder’s passing through the registrar and transfer agency (RTA). In charge of overseeing share transfers is the RTA.

4. Provide Necessary Documentation:

•         The shareholder’s death certificate.
•         Forms for transmission requests (as supplied by the RTA).
•         Certificates of Probate of Wills, Letters of Administration, Succession, and Legal Heirs (where applicable).
•         An indemnity bond and the legal heirs’ affidavit (in certain situations).
•         Any further papers that the business or RTA specify
  

5. Transfer of Shares: In accordance with the instructions given, the shares are transferred to the names of the beneficiaries or legal heirs after the supporting documentation has been submitted and approved.
   
6. Update Shareholder Records: To reflect the ownership changes, the company updates its shareholder records.
   
7.  Payment of Stamp Duty: The transfer of shares may be subject to stamp duty in some countries. Make sure you pay any applicable stamp duty.

 

 

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