Introduction:
Transmission of Shares: The word ‘transmission‘ means devolution of title of shares otherwise than by transfer, for example, devolution by death, succession, inheritance, bankruptcy, marriage etc. Transfer of title by operation of law. This type of situation arises when a shareholder dies, inheritance, bankruptcy, marriage and succession. Transfer of shares relates to a voluntary act of the shareholder whereas transmission of shares is by operation of law.
As per section 56 (2) of companies act 2013: Nothing in sub-section (1) shall prejudice the power of the company to register, on receipt of an intimation of transmission of any right to securities by operation of law from any person to whom such right has been transmitted.
A transmission of interest in shares of a company, of a deceased member of the company, made by the legal representative of a deceased member shall be considered as transmission of shares by operation of law. This transmission will be registered by a company in the Register of Members. The transfer of any security or other interest of a deceased person in a company made by his legal representative shall, even if the legal representative is not a holder thereof, be valid as if he had been the holder at the time of the execution of the instrument of transfer. On death of the shareholder, legal heirs are required to submit a request letter supported by an attested copy of the death certificate of the deceased shareholder, probate, succession certificate and the relevant share certificate.
Main Provisions Relating to Transmission of Shares
- Person eligible to apply for transmission: 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. In other words in case of joint holding, the survivor or survivors shall only be entitled for registration and the legal heir of the deceased member shall have no right or claims.
- Share transfer deed not required for Transmission: Execution of transfer deed not required in case of transmission of shares. Intimation/application of Transmission accompanied with relevant documents would be enough for valid transmission request.
- 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 documents:—
a. Certified copy of death certificate;
b. Succession certificate; (Required only in case “Will” is not available).
c. Probate; (certified copy of the will is called as ‘probate’. Succession certificate is not required when probate or letter of administration is issued.)
d. Specimen signature of the successor.
- Liability on shares shall continue: In case of transmission of shares, shares continue to be subject to the original liabilities, and if there was any lien on the shares for any sums due, the lien would subsist, notwithstanding the devaluation of the shares.
- Payment of consideration or stamp duty not required: Since the transmission is by operation of law, payment of consideration or payment of stamp duty would not be required on instrument of transmission.
- Time limit for issue of share certificate on transmission: Every company, unless prohibited by any provision of law or order of any Court, Tribunal or other authority, shall, within one month deliver the certificates of all shares transmitted after the application for the registration of the transmission of any such shares received. As per section 56 (4) of companies act 2013, every company shall, unless prohibited by any provision of law or any order of Court, Tribunal or other authority, deliver the certificates of all securities transmitted within a period of one month from the date of intimation of transmission under sub-section (2) in case of transmission of securities.
- Time Limit for Refusal of registration of Transmission: Provisions related to Refusal of registration and appeal against refusal is given in Section 58 of the Companies Act, 2013.Power of refusal to register transmission of shares is to be exercised by the company within thirty (30) days from the date on which the intimation of transmission is delivered to the company.
- Time Limit for appeal against refusal to register Transmission by Public Company: As per section 58(4), the person who gave intimation of the transmission by operation of law may, within a period of sixty (60) days of such refusal or where no intimation has been received from the company, within ninety (90) days of the delivery of the intimation of transmission, appeal to the Tribunal against such refusal.
Procedures to be followed for Transmission of Shares:
1. The survivor in case of joint holding or legal heir, as the case may be, for transmission of shares by operation of law in his/her favour shall file a simple application with the Company with relevant documents such as death certificate, succession certificate, probate, etc., depending upon various circumstances as may be considered for transmission of shares by the Company.
2. The company records the particulars of the death certificate and a reference number of recording entry is given to the shareholder so as to enable him/her to quote such number in all future correspondence with the company.
3. The company review and verify the documents submitted with transmission request. If all the documents are in order, company shall approve the transmission request and register the shares in the name of the survivor or legal heir as the case may be.
4. The company shall within thirty (30) days, from the date on which the intimation of transmission is delivered to the company, communicate refusal to the concerned person in case documents submitted with transmission request are not in order.
5. Dividend declared before the death of the shareholder will be payable to legal representative but dividend declared after the death of a member can be paid to him only after registration of his name and till that period it has to be kept in abeyance.
