Recovery of Shares

Difference Between Transfer of Shares and Transmission of Shares

Difference Between Transfer of Shares and Transmission of Shares

The transfer of shares must be carried out regularly among the companies and plays an important role in the identification and definition of the company. The rules and regulations which govern the transfer of shares and the transmission of shares are laid down in the provisions of the Companies Act 2013 and also apply to any company that has transferred the title over the shares from the owner to the owner of the shares. The owner of the shares can be considered the share transferee, and the share transferor is the company. The transfer of shares should happen through the operation of law to comply with the rules and regulations of your country in the event of the death, intestacy, or insolvency of the owner. If the company is wound up, the shares are passed on to the assignee. Certain provisions under the Companies Act talk about the recovery of shares and also about the transfer of shares, i.e. Section-58, 56, and Rule-11 of Companies rules related to share capital and debentures, 2014.

Definition of Share under Indian Laws

A share is a share of a company owned by a person, such as a shareholder. It represents a member’s interest in the company. It also helps in calculating the dividend value for each shareholder. A share in a company is a unit of ownership owned by an investor. A share of a company’s share capital includes stock. A share of common stock shares gives voting rights. An investor trades capital in exchange for a share. A share has derived various rights and obligations associated with and attached to it. A share is a movable property that can be transferred by the rules laid down in the Company’s articles of association (AOA). On certain terms and conditions, you can notice that the definitions of shares and stocks are two terms that most people use interchangeably. However, they have different functions in terms of how a company’s share capital is represented for the recovery of shares.

Review of transfer of shares and transmission of shares

There are various review processes for the transfer and transmission of shares to comply with the provisions of the Companies Act 2013, the application process, and the documents required for the transfer to take place for the recovery of shares. Here are the definitions as per the Companies Act of the transmission of shares and transfer of shares laid down below for your better insight:

Transmission of shares

The transfer of shares has to abide by the provisions of the Companies Act. The transfer of shares carried on the demise of the shareholder and also the investor. It can also be observed that the shareholder becomes bankrupt or insane. The transfer of shares may also take place when the shareholder is a company that has gone into liquidation or even in the case of winding up of a company and also in the case of the death of the person holding the shares, they are transferred in their name to a legal representative. If the person is insolvent, they are transferred to an official assignee of the shares. Section 56 of the Companies Act 2013 can be noticed, which handles the application procedure for transfer as well as transmission of shares, takes place whenever the application of the transfer of shares is shared, along with all the necessary documents required for the recovery of shares. There are the following documents required for it are laid down below for your reference:

  1. Attested copy of PAN card
  2. Succession certificate, if required
  3. Probate of the will, if required
  4. Will if required
  5. Also, a letter of administration if required
  6. Specimen signature of the successor
  7. Submit the certified copy of the death certificate of the holder or the owner of the shares.
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The company that is applying for the transfer of shares has to deliver all these certain things that are mentioned above within 1 month from the date of the application or receipt, which are applicable until it has been prohibited or prevented by law (court or tribunal).

Transfer of shares

Any real-time or physical movement of any business is known as the transfer of that particular asset, which has to take place in cases of sharing as an operation or voluntary by the laws. The transfer of shares occurs by the holder or the owner of the share. A transfer of shares, as well as the recovery of shares, is the deliberate transfer of ownership of a share. It is a contractual act. This particular transaction related to the transfer of shares occurs between the two parties, the transferor and transferee of shares. A share of a private company is not transferable except under certain circumstances. A share of a public company is freely transferable unless the company refuses to do so with good cause. To transfer shares, a transfer deed must be executed. It also derives its origin from the Companies Act read with Rule-11 of the Company’s Share Capital and Debentures Rules, 2014, in cases of the transfer of shares to file along with the special form that is SH-4.

The prescribed time limit for delivery of the certificate in both cases

Each company is required to deliver the certificates for all transferred or intimated securities within one month of the date of delivery of the document of transfer in the case of transfer, intimation of transfer as applicable unless prohibited by law or order of a Court, Tribunal, or other authority for the recovery of shares.

Penalty in case of non-compliance

It is for any company that fails to comply with the above provisions under the Companies Act, which will cost you a fine or penalty up to 25,000 INR but can be extended up to the limit of 5 lakhs INR and any officer of that company who fails to comply with those provisions will be liable to a fine of no less than Rs 10,000, but no more than Rs.1 lakhs. The difference between the transfer of share and transmission of share lies in the transfer. A share transfer is a voluntary transaction initiated by a transferee or a transferor, whereas a share transmission is an operation carried out by law and initiated by a legal representative or a receiver.

Key Difference between transmission and transfer of shares

The key difference between the transmission of shares and the transfer of shares lies in the terminology itself. The transfer of shares, as well as the recovery of shares, has been required to refer to the voluntary transfer of ownership of shares from one party to another party, and also, in India, the terms and conditions of transmission of shares and transfer of shares are used interchangeably. As per the Indian laws related to inheritance to the right, the transfer of shares takes place when a person passes away, and the ownership of the shares is transferred to the person’s heirs or successors. Here are the key differences based on certain components of the transfer of shares and transmission of shares:

  1. The contrast between founded on the meaning of transfer of shares and transmission of shares is that transfer as per the laws discusses the transfer of shares for shares starting with one party and then onto the next party, though an exchange of offers alludes to the exchange of proprietorship because of the demise or insufficiency of the ongoing investor.
  2. The transfer of shares can be done at any time and also frequently, whereas the transmission of shares occurs only after the demise of the incapability of the shareholder.
  3. The transfer of shares can be considered a voluntary transfer, whereas the transmission of shares can be done on an involuntary basis and guided by the inheritance laws.
  4. The transfer of shares requires the completion of the stock transfer form also based on the stamp duty applicable, whereas the transmission of shares requires any court order in the form of any succession certificate, the probate or the will, or the letter administration based on the case to case.
  5. The transfer of shares has to be made by any investor or any legal entity, whereas the transmission of shares pertains to the relationship between the deceased and the person to whom the share has been transmitted.
  6. The transfer of shares has to comply with the provisions of the Companies Act and also the SEBI regulations, whereas the transmission of shares has to comply with the provisions of the same as mentioned respectively and also as per the laws of succession or inheritance shall be made applicable.
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Procedure for transfer of share

There are several steps in the process of transferring shares in India. The first ladder to climb is to execute the share transfer deed between the transferor and the transferee. This includes important information like the company name, the details of the shares, and the consideration exchanged. The STD is then stamped according to the stamp duty rules of the state in which the company is registered. There are various procedures involved in the process of transfer of shares as per the laws relating to it as follows:

Execute the share transfer deed.

The transferor and transferee have to execute the share transfer deed, and the documents have to be submitted with the name of the company, the types of shares being transferred, and the consideration paid for both signatures.

Submission of documents to the company

The execution process of the share transfer document and the share transfer form, together with the share certificate or certificates representing the shares to be transferred, must be sent to the company whose stock is being transferred. The board of directors of the company or other main members of the company will review and approve the transfer of shares if all other relevant documents are in order.

Information about the registrar of companies

The organization is expected to give data to the registrar of the companies about the transfer of shares within 30 days from the date of endorsement of the transfer of shares.

Payment for registration fees and stamp duty

The stamp duty has to be paid for the transfer share deed within the given time limit, and the registration fees are to be paid for the registration of the transfer of shares.

Upgrade shareholder’s record.

The shareholder company has to upgrade its record on certain special circumstances of the transfer and any other specific requirements of the company or the regulatory authorities involved, which involve the transfer of shares, and to issue necessary communication related to the transferor and transferee for the completion of the transfer.

Procedure for the transmission of shares

There are various procedures involved for the transmission of shares in India, like the process of transferring the ownership of shares from a deceased shareholder to the successor of the deceased shareholder due to the death or incapability of the shareholder, which is to be taken as the transmission of shares. These are various key procedures involved in the transmission of shares laid down below for your better understanding:

Application for transmission of shares

In the case of the joint family, the survivor or the legal heir who wants, according to the laws, shall file an application for the transmission of shares along with other relevant documents like the death certificate, also the succession documents, probate, or will be considered for the transmission of shares buy the company. 

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Death certificate records

The company has to take the record of the death certificate, and also, the reference number entry derived is given to the shareholder to enable him to give such a number in the future if required by the company.

Process of document verification

The company is liable to review and verify documents submitted for the transmission of shares. All the documents should be kept in order, and the company is required to approve transmission requests in the name of the survivor of the legal heir.

Transmission request

There can be cases where the documents required to be submitted are not in proper order, and then they can be rejected. Also, the company has to communicate refusal within 30 days from the date such response is received.

Dividend sharing process

The dividend has to be declared before the demise of the shareholder and shall be payable to the legal representative, but the dividend has to be paid after the death of a member and can be paid to him only after registration in his name and also till that period.

Conclusion

In the end, we can conclude that the transfer and transmission of shares involve complex procedures that govern changes in the ownership of listed company securities. The differences between these terms imply the significance of strictly following accurate protocols during such incidents. All these forms of transfer can be considered voluntary share transfer, which is when an existing shareholder voluntarily consents to sell or transfer securities held under their name to another eligible person based on a mutual agreement. The transaction must be documented with detailed documents to prove that the sale or gift consideration was exchanged between the parties. Transmission of shares, on the other hand, is when a deceased shareholder automatically inherits and vests shares to the legal heirs or nominees of the deceased shareholder based on the provision of death proof or succession documents without the explicit consent of the deceased shareholder or a financial exchange.

FAQ’s

  1. What is the process of transfer and transmission of shares?

    The process of transfer of shares and the transmission of shares through the act of parties and also through devolution of the law that the death or any other liquidation process related to the bankruptcy.

  2. What is the meaning of the transmission of shares?

    The transmission of shares can be the devolution of title to the other shares other than through the transfer, for example, the devolution in case of death, also the succession, and another inheritance process to be followed related to marriage.

  3. What is the meaning of transfer of share?

    The transfer of shares is the process of transferring existing shares from one party to another person, either through sale or gift.

  4. What is the difference between the transfer of shares and the transmission of shares?

    The transfer of shares should be by the act of the parties and transmission of shares through the devolution of the law, that is, death, bankruptcy. Also, in the case of the transmission of shares is required to be followed, unlike the transfer of shares.

  5. What is the difference between the transmission of shares and also the sale of shares?

    The difference between the transmission of shares and the sale of shares involves the company transferring through to other legal entities, which takes place through the exchange.

  6. What is the meaning of shares?

    The shares are meant for the units of ownership in any company, and owning the shares means the individual is holding a grip on the company profit, such as the voting rights and capital growth, but there are also involved risks and the market ups and downs.

  7. Is it possible for the company to refuse the transfer or transmission of shares?

    The company can refuse the transfer or transmission of shares if the company violates the articles of association and any other statutory provisions. The reason behind the refusal must be communicated to the transferee. In the cases of transmission or transfer of shares, the refusal part has to be less common.

  8. Who can start the transfer of shares?

    The transfer of shares can be started by the shareholder who is eager to sell or gift its shares to another party through the voluntary process, which also involves deliberate action by the transferor.

  9. Is it possible to transmit shares without a will?

    Yes, the transmission of shares without a will. If the stakeholder dies in the meantime without leaving any will, then the shares can be transmitted to their legal heirs based on the laws of succession, which can be applicable per se.

  10. What is the role of the transfer of share forms?

    A transfer of shares can be considered a legal document that legally transfers shares from a transferor to a transferee. In most jurisdictions, this particular document is called a transfer of share form. In most jurisdictions, a share transfer form is filed with the Securities and Exchange Commission. A share transfer form typically includes the following information: the name and address.

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