Transmission of shares takes place due to the operation of law that is when the holder is no more or has become lunatic or insolvent. It can also take place when the holder of shares is a company, and it has wound up. There is no transfer deed executed, and the transferee will be given the rights to the shares, and the transmission is recorded only when the transferee gives proof of entitlement to the shares. In case of the death of the holder the shares, it will be transferred to the legal representative and in case of insolvency to the official assignee. The following table illustrates the differences between the transfer of shares and transmission of shares.
When does transmission of share take place ?
Transmission of shares can take place for a variety of reasons. Some common situations in which transmission of shares may occur include:
- Upon the death of a shareholder: When a shareholder dies, their shares may be transmitted to their beneficiaries or heirs as part of their estate.
- When shares are sold or transferred: A shareholder may choose to sell or transfer their shares to another person or entity, in which case the transmission process would need to be completed.
- When shares are gifted: Shares may be gifted by a shareholder to another person, in which case the transmission process would need to be completed.
- When a company is merged or acquired: In the event of a merger or acquisition, the shares of one company may be transmitted to shareholders of the other company as part of the transaction.
- It is important to note that in order for the transmission of shares to be valid, certain legal procedures must be followed and the necessary documents must be executed and filed with the appropriate authorities.
The Investor Education and Protection Fund (IEPF) is a fund established by the Government of India to educate and protect investors in the country’s capital markets. The IEPF is administered by the Ministry of Corporate Affairs and is responsible for promoting investor awareness and education, as well as protecting the rights of investors. The IEPF also plays a role in the process of transmission of shares, as it is responsible for the receipt and disbursement of unpaid or unclaimed dividends and other amounts due to shareholders. The IEPF maintains a database of such unpaid or unclaimed amounts and works to reunite investors with their money.
Transmission of shares refers to the process of transferring ownership of shares in a company from one person or entity to another. This can occur for a variety of reasons, such as when an owner of shares dies and the shares are inherited by their beneficiaries, or when shares are sold or gifted to another person. In order to complete the transmission of shares, certain legal procedures must be followed and the necessary documents must be executed and filed with the appropriate authorities.
A duplicate share certificate is a copy of a shareholder’s original share certificate that has been lost, damaged, or destroyed. Shareholders may request a duplicate share certificate if their original certificate is no longer in their possession or is no longer legible. To obtain a duplicate share certificate, shareholders typically need to submit a request in writing to the company’s share registry or to the company itself, along with any supporting documentation that may be required, such as proof of ownership. The company will then review the request and, if approved, issue a new copy of the shareholder’s share certificate. It is important to note that the issuance of a duplicate share certificate does not affect the shareholder’s ownership of the shares or the number of shares they hold.
Documents required for Transmission of Shares:
In case of transmission of shares by operation of law, it is not necessary to execute and submit transfer deed. A simple application to the company by a legal representative along with the following necessary evidences is sufficient:—
- Certified copy of death certificate;
- Succession certificate; (Succession certificate is a document issued by a competent court (civil) certifying a rightful person to be the successor of a deceased person)
- Probate (sample given below);
- Specimen signature of the successor..
Note 1: If a member of a company dies and he/she leaves after him a will or letter of administration then the survivors shall get a copy of ‘will’ certified under the seal of a Court of competent jurisdiction. i. The certified copy of the will is called a ‘probate’. Succession certificate is not required when probate or letter of administration is issued. ii. If a member of a company dies without leaving a will, then succession certificate issued by a Court of competent jurisdiction shall be submitted to the company. Once succession certificate is granted, it provides full indemnity to the company regarding transmission of shares by operation of law. iii. The survivors in case of joint holding can get the shares transmitted in their names by production of the death certificate of the deceased holder of shares
Note 2: Such a legal Representative is however, not the member of the Company but the legal owner of the Shares instead of registered as a member, he may make transfer the shares as the deceased or insolvent member could have made.
Note 3: Where title to the shares comes to vest in another person by operation of law, it is not necessary to submit transfer form.
Note 4: Since the Transmission is by the operation by law, so neither the stamp duty nor consideration is required on instrument of transmission.
Note 5: The legal Representative of a deceased member shall not be entitled to exercise voting rights or other rights in a general meeting unless he is registered as a member in respect of the Shares.
Note 6: Transmission in case of Joint Shareholding: Regulation 23 of Table F of the Companies Act, 2013 provides that on death of a member where member was joint shareholder, the survivors or survivor shall be the only persons recognized by the Company. The legal heirs of deceased member are not entitled to get registered as joint holder along with surviving holder.
- Eligible persons: The persons eligible to apply for the transmission of shares on the death of the member under Rule 23 are:
- Survivor/Survivors, in case the shares are held jointly.
- Nominee /Nominees
- Legal representatives
- Election: Any person becoming entitled to the shares can elect :
- Himself as the holder of the share or
- Make a transfer of share, as the member had made when he was alive
- Delivery of Documents: After becoming entitled to the share, a person shall have to deliver all the documents to the company as may be provided from time to time.
- Entitle for Dividends: The person who becomes entitled to share because of transmission occupies the right to receive the dividends. Along with dividends, he acquires all the rights attached to the shares.
Procedure for Transmission of Shares
The SEBI enumerates the operational guideline for the transmission of shares via a circular on 18thMay 2022:
- The claimant of the share shall make an application to the issuer company for the transmission of shares.
- After examining the documents, the issuer company executes the transmission by issuing a LOC (Letter of Confirmation).
- The RTA (Registrar and Transfer Agent) shall retain the physical shares and stamp on the copy of the certificate or the reverse of the certificate that is to be given to the claimant.
- The issuer companies shall give the digitally signed copy of the LOC to the claimant by registered speed post.
- After receiving the digitally signed LOC, the claimant shall submit the DEMAT request within 120 days of the issue of LOC at the Depository participant.
- The depository participant shall furnish the DEMAT request of the claimant and forward the request to the issuer company for opening the DEMAT account.
- If the claimant does not process the DEMAT request within 120days of issuance of the LOC, the securities will be credited into the Suspense Escrow DEMAT Account of the Issuer Company.
Conclusion
The transmission of shares provides the shares of a deceased individual from getting obsolete. The legal heir, representatives, the nominee, and the survivor can insist on the transmission request. A transmission is a form of transfer whereby the transfer to the claimant takes place by operation of law. There are cases when the shares of the shareholder get forfeited. In that case, the companies act provides the ways by which the nominee or the legal representative of the insolvent member can claim the shares in their name. The claimants themselves shall take this transmission process and have to apply it to the issuer company. The issuer company is defined as the company whose shares were held by the person while he was alive.