Transmission of Shares: Understanding the Process
Shares in a company represent ownership in the business and can be transferred from one individual to another. However, there are situations where shares may need to be transmitted or transferred due to unforeseen circumstances. In this blog, we will discuss the transmission of shares and the process involved.
What is Transmission of Shares?
Transmission of shares refers to the transfer of ownership of shares from one person to another without any consideration. It occurs when the original shareholder passes away or becomes incapacitated, and the shares are transferred to their legal heirs or nominees.
The Process of Transmission of Shares
The process of transmission of shares can be broadly divided into two stages:
- Intimation to the Company
The first step in the transmission of shares process is to inform the company about the death of the shareholder or their incapacity. This can be done by submitting a copy of the death certificate or other relevant documents to the company.
- Transfer of Shares
Once the company is informed about the transmission of shares, the legal heirs or nominees of the deceased shareholder can transfer the shares to their names. This can be done in two ways:
a. Transmission by nomination
If the deceased shareholder had nominated a person to receive the shares, the legal heirs or nominees can transfer the shares by submitting a copy of the death certificate and the nomination form to the company. The company will then register the transfer of shares in the name of the nominee.
b. Transmission by succession
If the deceased shareholder did not nominate a person to receive the shares, the legal heirs will need to obtain a succession certificate or probate from the court. This certificate will authorize the legal heirs to transfer the shares to their names.
The legal heirs will need to submit the succession certificate or probate, along with the share certificates and a transfer deed, to the company. The company will then register the transfer of shares in the names of the legal heirs.
When Can Transmission of Shares Occur?
Transmission of shares can occur in the following situations:
- Death of a shareholder: When a shareholder passes away, the shares held by them can be transmitted to their legal heirs or nominees.
- Incapacity of a shareholder: If a shareholder becomes incapacitated due to illness or injury, and is unable to transfer their shares, the shares can be transmitted to their legal heirs or nominees.
- Insolvency of a shareholder: If a shareholder is declared insolvent, their shares may be transmitted to their creditors.
- Court orders: In some cases, court orders may require the transmission of shares from one person to another.
Legal Heirs and Nominees
Legal heirs are the persons who inherit the assets of the deceased person as per the laws of succession. If the deceased shareholder had not nominated anyone, their shares will be inherited by their legal heirs. Legal heirs can be determined as per the laws of inheritance applicable to the deceased shareholder.
Nominees are persons nominated by the shareholder to receive the shares after their death. Nomination of shares can be done by filling out a nomination form provided by the company. Nomination of shares is optional, and the shareholder can choose to nominate anyone they wish to receive the shares after their death.
Documentation Required for Transmission of Shares
The following documents are required for the transmission of shares:
- Death certificate of the shareholder
- Succession certificate or probate of will (in case of transmission by succession)
- Share certificate(s)
- Transfer deed
- Nomination form (in case of transmission by nomination)
- Court orders (if applicable)
Conclusion
Transmission of shares is an important process that ensures the smooth transfer of ownership of shares from one person to another. It is important to follow the correct procedure to ensure that the transmission is legally valid and the shares are transferred to the correct legal heirs or nominees. If you are unsure about the process of transmission of shares, it is advisable to seek professional advice from a lawyer or a chartered accountant.
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Frequently Asked Questions (FAQs)
What is transmission of shares?
Transmission of shares refers to the process of transferring ownership of shares from one person to another without any consideration. It occurs when the original shareholder passes away or becomes incapacitated, and the shares are transferred to their legal heirs or nominees.
Can a shareholder nominate more than one person to receive their shares?
Yes, a shareholder can nominate multiple persons to receive their shares in the event of their death.
What happens if the deceased shareholder did not nominate anyone to receive their shares?
If the deceased shareholder did not nominate anyone, their shares will be inherited by their legal heirs as per the laws of inheritance applicable to them.
What is a succession certificate or probate of will?
A succession certificate or probate of will is a legal document that authorizes the legal heirs of a deceased person to transfer their assets, including shares, to their names.
Is it necessary to obtain a succession certificate or probate of will for transmission of shares?
Yes, if the deceased shareholder did not nominate anyone, their legal heirs will need to obtain a succession certificate or probate of will to transfer the shares to their names.
What is a transfer deed?
A transfer deed is a legal document that transfers the ownership of shares from one person to another.
Can transmission of shares occur in the case of insolvency of a shareholder?
Yes, if a shareholder is declared insolvent, their shares may be transmitted to their creditors.
Can transmission of shares occur if the shareholder is alive?
No, transmission of shares can only occur after the death or incapacity of a shareholder.
Is nomination of shares mandatory?
No, nomination of shares is optional. A shareholder can choose to nominate anyone they wish to receive their shares after their death.
Can transmission of shares occur in the case of court orders?
Yes, in some cases, court orders may require the transmission of shares from one person to another.
