What is Share Transfer and Share Transmission? Difference between transfer and transmission of shares as per Companies Act, 2013

Introduction

A transfer is an action that involves moving an asset, and for shares, this action can either be voluntary or required by law. Shares are said to be transferred when they are moved voluntarily by the shareholder and according to a written agreement. While the movement of shares is referred to as “transmission of shares”, when it occurs by operation of law, upon the shareholder’s death, if he becomes insolvent, or if he becomes insane. Here in this blog we will look into the information on “What is Share Transfer?”, “What is Share Transmission?”, And difference between transfer and transmission of shares under company act

What is Share Transfer?

The intentional transfer of ownership of the shares between the transferor (one who transfers) and the transferee (one who receives) is referred to as a transfer of shares. A public company’s shares can be freely transferred unless the company has a good reason to forbid it. A private limited company’s shares cannot be transferred as easily as a public company.

What is Share Transmission?

When shares are passed on because the original owner has died, become mentally unfit, or is bankrupt, it’s called Share Transmission. The person receiving the shares doesn’t need to sign a transfer document, but they must show proof that they have the right to the shares. If the owner has died, the shares go to their legal representative, and if the owner is bankrupt, the shares go to an official assigned to handle their debts.

Difference between transfer and transmission of shares under companies act 2013

Transfer and Transmission of Shares as per Companies Act, 2013

Transfer of Shares as per the rule of Section 56 of the Companies Act

It will only take effect if a proper instrument of transfer, in Form SH-4, as specified in sub-rule 1 of Rule 11 of the Companies (Share Capital & Debenture) Rules 2014, is executed by or on behalf of the transferor and the transferee and includes all the necessary information, including the transferee’s name, address, and occupation, if any. It must be presented to the company by one of the parties along with a certificate of securities or a letter of allocation of securities, as appropriate, within 60 days of the date of execution.

If the transferor submits an application for the transfer of partially paid shares, the company notifies the transferee of the application using Form SH-5 as specified in sub-rule 3 of Rule 11 of the Companies (Share Capital and Debentures) Rules 2014, and the transferee has two weeks from the date of receipt of the notice to withdraw any objections.

Suggested Read: Share Transfer Procedure in Private Limited Company

Transmission of Shares as per the rule of Section 56 of the Companies Act

When the application for the transmission of shares and the necessary documentation is approved, it will be impacted. Transfer deed execution is not necessary in the case of transmission of shares. The following documents are necessary for the transfer of shares.

• Self – attested copy of PAN Card
• Signature of a Successor
• Death Certificate copy
• Probate of Will/Letter of Administration/Court order
• Succession Certificate

The deadline for giving the certificate in both situations.

If a company moves or sends securities, it must provide the certificates for those securities within a month of getting the transfer request or notification, unless a law, court, or other authority says otherwise.

Penalty for failure to comply

The firm shall be subject to a punishment of not less than INR 25,000 but not more than INR 5,00,000 for any failure to comply with the rules and regulations implied by the company law, and each officer of the company who is in default shall be subject to a fine of not less than INR 10,000 but not more than INR 100,000.

Conclusion

Both the transfer of shares and the transmission of shares aim to change who owns the shares’ title, but they differ in that the transfer of shares is a choice made by the transferee or transferor, whereas the transmission of shares is a legal requirement started by the receiver or legal representative.