Under the Companies Act, 2013, the transfer and transmission of shares represent two distinct legal processes for changing the ownership of securities.
1. Transfer of Shares
Transfer of shares is a voluntary act initiated by the shareholder (transferor) to pass the title of shares to another person (transferee) through a sale, gift, or agreement.
Key Requirements:
Instrument of Transfer: Must be executed using Form SH-4, duly stamped and signed by both the transferor and transferee.
Stamp Duty: Stamp duty must be paid according to the Indian Stamp Act and relevant state regulations (typically 0.25% of the share value).
Witness: The execution of the transfer deed must be witnessed by a person who confirms the identity of the parties.
Submission: The signed deed, along with the share certificate or letter of allotment, must be delivered to the company within 60 days from the date of execution.
Company Action: The Board of Directors reviews the application. Once approved, the company registers the transfer in its books and issues new certificates to the transferee within one month of receiving the valid instrument.
2. Transmission of Shares
Transmission of shares occurs by operation of law rather than by choice. It typically happens upon the death, insolvency, or lunacy of a shareholder.
Key Characteristics:
Nature: Involuntary; no sale or agreement is involved.
Documentation: No transfer deed (Form SH-4) or stamp duty is required.
Process: The legal heir, nominee, or official assignee must apply to the company with proof of entitlement.
Required Documentation (General):
Certified copy of the Death Certificate.
Proof of entitlement (e.g., Succession Certificate, Probate of Will, Letter of Administration, or Court Decree).
Specimen signature of the successor.
KYC documents of the claimant.
Original share certificate(s).
Company Action: Upon verifying the documents, the company Board passes a resolution to approve the transmission, updates the Register of Members, and endorses the name of the successor on the share certificates.