Transmission of Shares

Transfer and Transmission of Shares

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Transfer and Transmission of Shares

 

Free transferability of ownership is one important features of a private limited company or limited company. Since private limited companies are closely held, the transfer of shares in a private limited company is subject to some restrictions under the Companies Act, 2013. In this article, we look at the transfer and transmission of securities, process of transfer and transmission of shares, delivery of certificate of securities as per Companies Act, 2013.

Transfer of Shares

A company will register a transfer of shares only when an instrument of share transfer that is duly stamped, dated and executed by the transferor in support of the transferee with name, address and occupation has been delivered to the company by either party within a period of sixty days from date of execution.

In the case of the instrument of transfer has been lost or has not been delivered, the company can register the transfer on an indemnity bond. On receiving of intimation, a company has power to register transmission of some right to securities by operation of law from any person to whom such right has been transmitted.

The transfer of any security or of other interest of a deceased person in a company that is being made by his legal representative will be legally binding as if he had been the holder during the time of the execution of the instrument of transfer.

Delivery of Share Certificates

All companies are required to deliver the certificate of shares of all securities allotted, transferred or transmitted:

  • Within a period of 2 months from the date of incorporation, in the event of subscribers to the memorandum;
  • Within a period of 2 months from the date of allotment, in case of any allocation of any of its shares;
  • Within a period of 1 month from the date of receipt by the company of the mechanism of transfer or intimation of transmission; and
  • Within a period of 6month from the date of allotment in event of any allotment of debentures.

Nevertheless, where the securities are dealt with in a depository; the company will intimate the details of allotment of securities to depository right away on allotment of such securities

Process for Transfer of Shares

According to Companies Act, 2013, there is an 8-step process to follow to execute a transfer of shares. It involves the transferor first intimating the company of his or her intention to transfer shares upon his/her death, followed by a valuation exercise and a contribution to existing shareholders for said shares. In the event of no existing shareholder want to use this option, the transferor’s shares are able to then be offered to a legal representative of the owner. Only at this point can the company’s Board of Directors register this claim and pass a resolution to transfer the shares. Know more about the process for transfer of shares.

Application by Survivor

In event of death of shareholder of Company, The survivor in case of joint holding or legal heir, as the case may perhaps be, who want transmission by operation of law in his or her favor, will file a simple application with the Company with pertinent documents such as:

  • Death Certificate,
  • Succession Certificate,
  • Probate,
  • Specimen Signature of Successor etc., dependent upon various circumstances may perhaps be considers essential for transmission by the Company

On submission of the above documents, the company should methodically check the application for transmission of shares with definite attention to the following:

  1. Whether the application for transmission contains accurate details of the deceased member, e.g., his name, address, occupation, father’s or husband’s name, his shareholding and is accompanied by the pertinent share certificates.
  2. Whether the applicant has been sent along with the application:
    1. Death certificate, together with a certified true copy, of the deceased member;
    2. Succession certificate, if the deceased member has left no Will;
    3. If the deceased member has left a Will, related probate or letter of administration;
    4. Affidavit by the legal heir as declaring his right in the shares; and
    5. Indemnity bond binding him and his heirs, assigns etc. to insure the company in the event of the company having to face any proceedings, sustain some loss etc.

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