Process of Transmission of Shares Upon the Death of a Shareholder

Introduction

The transmission of shares upon a shareholder’s death is an important aspect of corporate governance and estate planning. When a shareholder passes away, their shares need to be transferred or transmitted to the rightful beneficiary or legal heir. This process, often involving legal formalities and documentation, ensures a smooth transition of ownership. In this article, we will delve into the intricacies of the process of transmission of shares upon a shareholder’s death, highlighting the necessary steps and providing insights into drafting a letter for the transfer of shares.

What is the Transmission of Shares?

Transmission of shares refers to the transfer of ownership from a deceased shareholder to their legal successor or beneficiaries. This transfer occurs in accordance with the shareholder’s will, the laws governing inheritance, or the provisions specified in the company’s articles of association. It is crucial to follow the prescribed procedure to avoid legal complications and ensure the rightful transfer of shares.

Persons who are eligible to apply for transmission of shares on the death of a shareholder:

• In case the shares are held jointly, by the survivor/survivors
• Nominee/ Nominees
• Legal Representatives, in case of sole holder

Note: These are the only people who shall be recognized by the company for the title of his shares. No stamp duty is payable in case of transmission of shares. Any liability in respect of the shares of the deceased will continue to exist.

The Process of Transmission of Shares Upon the Death of a Shareholder

The following is the process of transmission of shares upon the death of the shareholders:

Step 1: Obtain the Death Certificate and Other Required Documents

The first step in the transmission process is to obtain a certified copy of the shareholder’s death certificate. This document serves as proof of the shareholder’s demise and is necessary for initiating the transfer. Additionally, you may need to gather other relevant documents such as the deceased shareholder’s will, probate or succession certificate, and identification proofs of the legal heirs or beneficiaries.

Step 2: Review the Articles of Association and Share Transfer Provisions

Next, it is essential to review the company’s articles of association and any specific provisions related to the transfer or transmission of shares. These provisions outline the procedures to be followed and any restrictions or requirements that may apply. It is crucial to adhere to these guidelines to ensure a valid and lawful transfer.

Step 3: Drafting the Letter for Transfer of Shares

To initiate the transmission process, a letter for the transfer of shares must be drafted. This letter should include relevant details such as the deceased shareholder’s name, share certificate numbers, the number of shares being transferred, and the name and details of the legal heir or beneficiary. It should be addressed to the company’s registrar or transfer agent, requesting the transfer of shares.

Step 4: Submission of Documents and Verification

Once the letter for the transfer of shares is prepared, it needs to be submitted to the company’s registrar or transfer agent, along with the required documents mentioned earlier. The registrar will then verify the authenticity of the documents and ensure compliance with legal requirements. This verification process may take some time, and it is important to follow up with the registrar regularly to monitor progress.

Step 5: Issuance of New Share Certificates

Upon successful verification, the registrar will cancel the deceased shareholder’s share certificate and issue new share certificates in the name of the legal heir or beneficiary. These new certificates will reflect the change in ownership and serve as evidence of the transfer.

Documents Required for Transmission of Shares  

The following documents are required for the transmission of shares upon the shareholder’s death:

• Death certificate of the shareholder
• Succession certificate or probate of will
• Share certificate(s)
• Letter of indemnity
• Affidavit of the legal heir(s)
• Any other document required by the company

Summary

The transmission of shares upon a shareholder’s death involves a series of legal procedures to ensure a smooth transfer of ownership. By following the necessary steps, including obtaining the death certificate, reviewing the company’s articles of association, drafting a letter for the transfer of shares, and submitting the required documents, you can facilitate the transmission process. Remember to seek legal advice and assistance if needed to ensure compliance with applicable laws and regulations. By understanding and navigating the process of transmission of shares, you can safeguard the interests of the deceased shareholder’s legal heirs or beneficiaries while maintaining the integrity of corporate governance. These are the only people who shall be recognized by the company for the title of their shares). No stamp duty is payable in case of transmission of shares. Any liability in respect of the shares of the deceased will continue to exist.