The act of moving an asset is known as a transfer. The movement may be physical movement or even the actual ownership of the main title of the asset, or also both. For securities, the movement may be operational or voluntary by law. The procedure of transfer of shares is a voluntary act that is performed by the shareholders and usually takes place by way of a contract. Whereas, the procedure known as the transmission of shares happens due to the operation of law that applies after the death of the shareholders, or in an event when the shareholder turns out to be lunatic or insolvent.
What is the actual meaning of the transfer of shares?
Transfer of shares refers to the procedure of the international transfer of title of the shares between the translator and also the transferee. The shares of a specific public company can be freely transferrable unless the company has a proper reason to disallow the same. The shares of a company that is privately limited are not transferable and are subject to specific expectations. A deed regarding transfer is executed for the transfer of shares.
What is the meaning of the transmission of shares?
Transmission of shares usually takes place because of the main operation of law, that is when the holder original is dead or has become insolvent or lunatic. Also, it may take place when the original holder of shares is an organization and it has wound up. There is no occurrence of executing transfer deeds, and the transferee will be offered the rights to the shares, and also, the transmission is recorded only when the transferee can show proof of entitlement to the shares. In case of the demise of the shareholder, it will be transferred to the representative who is legal, and in case of insolvency, it will go to the official assignee.
Provisions under the Companies Act, 2013 and companies Rules, 2014
According to Section 56 of the Companies Act, 2013, you can perform the procedure known as the transfer of shares.
Transfer of Shares
This procedure will be affected only if the right instrument of transfer, in the form known as SH-4, as provided in sub-rule 1 of Rule 11 of Companies Rules 2014, duly dated, stamped, and is executed by or even on behalf of the transferee and the transferor and specifies all the vital details, such as an address, name, work if any of the noted transferee.
It must be delivered to the company by either party within just 60 days from the execution, along with a certificate of letters or securities of allotment of securities, as available. If the transfer of shares that are partly paid happens, then the company offers notice of the specific application Form SH-5 as given in sub-rule 3 of Rule 11 Companies Rules 2014, to the transferee. Also, the transferee should give no objection to the transfer within a timeline of 2 weeks from the receipt of the notice.
Transmission of Shares
This procedure may be affected when the application of transmission of shares, including the valid, relevant documents. There is no requirement for the execution of the transfer deed. The following are the important and relevant documents for the procedure of transmission of shares. Some of those important documents are:
Self-Attested Copy of PAN
Certified Copy of the Death Certificate.
Specimen signature of successor.
Succession certificate/ Letter of Administration/ Will/Probate of Will/ Court Decree.
Every organization needs the specific certificates of all securities transmitted or transferred within just one month from the receiving date of the instrument of transfer in case of intimation or transfer of transmission as can be applied unless prohibited by any order of the Court, Tribunal, or any other respected authority, or any important provision of law.
Penalty in case of non-compliance
Where any kind of default is made in complying with the above-mentioned rules, the organization or company will be punishable with a fine that should not be less than Rs. 25000. However, this may even extend to Rs. 5,00,000, and also every working officer of the organization who is in default will be punishable with a fine that should not be less than Rs. 10000 but can extend to the amount of Rs. 100000.
While the procedure of transfer of shares and also the transmission of shares intend a change in ownership of the shares’ titles, the distinction lines in the factor that the process of transferring shares in voluntary and started by the transferor or transferee while the procedure of transmission of shares is operational by specific law and is initiated by the official or legal receiver or representative.
Thus, share transmission is a very critical procedure that should follow several specific rules and steps determined by the government or authority. Also, while performing this, you should know the difference between transfer and transmission of shares clearly.