A Complete Guide to Transmission of Shares

What is Transmission?

The transmission of shares refers to the process of transferring ownership of shares from one person to another primarily because of the death of the shareholder. 

According to Section 56 of the Companies Act of 2013, a company has the authority to register upon receiving notification from any person to whom a right has been transmitted to register securities through legal operation.

Many people usually get confused between transmission & transfer of shares, 2 very common terms used in case of financial securities.

Difference between Transfer & Transmission of Shares?

  • Transfer of shares: Transfer of shares involves voluntary sale or transfer of shares from one shareholder to another. It is a transaction where the owner of the shares (transferor) transfers the ownership of those shares to another person (transferee).
  • Transmission of shares: Transmission of shares is an automatic process as per the prevailing inheritance laws that occurs due to death of the shareholder. It is not a voluntary act of transfer, rather it is governed as per the laws of the country. 

Process for transmission of shares

When the value of shares in any one company exceeds 5 lakhs, a succession certificate, probate of will, or letter of administration in favor of the legal heirs must be obtained from the courts. For shares valued up to 5 lakhs, NOCs from all legal heirs, expressing no objection to the transmission along with legal heir/ surviving member certificates, are required.

Probate of Will: Probate of will refers to the legal process of proving the authenticity of a deceased person’s will. A will is a legal document that outlines the distribution of a person’s assets and estate after their death. The probate process involves obtaining a court’s approval to authenticate and execute the terms of the will.

Succession certificate: A succession certificate comes into picture when the deceased died intestate i.e. without leaving a Will. It is a document that enables the holder to act on behalf of the deceased in order to collect obligations and securities owed to him or payable in his name. In the event that a will is not present, this document serves as the principal means by which the heirs may assert their claim to the estate’s holdings. A high court or district court should be the place to apply for a succession certificate. 

LOA (Letter of Administration): Letter of Administration is a legal document issued by a competent court that authorizes an individual (referred to as the administrator) to administer the estate of a deceased person who has not left a valid will (intestate). The process is governed by the Indian Succession Act, 1925.

If a deceased person left a will, the legal process is different, and the court may grant a “Probate” to the executor named in the will. If there is no executor named, or if the named executor is unable or unwilling to act, the court may grant Letters of Administration with the will annexed.

Legal heir certificate or surviving member certificate: These certificates are issued by the relevant legal authorities to establish the legal heirs or successors of a deceased person. The purpose of obtaining such a certificate is to facilitate the transfer of assets, properties, and other rights from the deceased individual to the rightful heirs. Legal heir certificate can be obtained for the following reasons – Inheritance and Succession, Transfer of Property, Insurance Claims, Pension Claims, Employment Benefits, Bank Account Closure, Legal Proceedings, Government Schemes and Subsidies, Settling Debts and Liabilities

The steps and documents required for the transmission of shares are: 

1. Obtain Death Certificate: The first step is to obtain the death certificate of the deceased shareholder. This document serves as proof of death and is required for initiating the transmission process.

2. Identify Legal Heirs or Beneficiaries: Identify and establish the legal heirs or beneficiaries entitled to the shares. This may involve obtaining legal heir certificates or other relevant documents from the authorities.

3. Contact with the Registrar and Transfer Agent (RTA) of the Company: Inform the registrar and transfer agent (RTA) of the company whose shares are being transmitted about the death of the shareholder. The RTA is responsible for managing share transfers.

4. Provide Necessary Documentation: Submit the required documents to the RTA, which typically include:

  • Death certificate of the shareholder.
  • Transmission request forms (as provided by the RTA).
  • Probate of will certificate or letter of administration or succession certificate or legal heir certificate (as applicable).
  • Affidavit of the legal heirs & Indemnity bond (in some cases).
  • Any other documents specified by the company or RTA

5. Transfer of Shares: Once the documentation is submitted and verified, the shares are transferred to the names of the legal heirs or beneficiaries as per the instructions provided.

6. Update Shareholder Records: The company updates its shareholder records to reflect the changes in ownership. 

7. Payment of Stamp Duty: In some jurisdictions, stamp duty may be applicable on the transmission of shares. Ensure that any required stamp duty is paid.