Thank you for your response
Thank you for your response
Our representative will get in touch with you shortly.
Get you Tax query Solved
Pick from the basket of various allied services:
Get Expert Assistance
The act of movement of an asset is termed as a transfer. The movement can be physical movement or the ownership of the title of the asset or both. For securities, this movement can be voluntary or operational by law. The transfer of shares is a voluntary act by the holder of shares and takes place by way of contract. Whereas, the transmission of shares takes place due to the operation of law that is on the death of the holder of shares or in an event where the holder becomes insolvent/lunatic.
Transfer of shares refers to the intentional transfer of title of the shares between the transferor (one who transfers) and the transferee (one who receives). The shares of a public company are freely transferable unless the company has a valid reason to disallow the same. The shares of a private limited company are not transferable subject to certain exceptions. A transfer deed is executed for the transfer of shares.
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:
|Details||Transfer of Shares||Transmission of Shares|
|What is it?||Voluntary Act||Operational by law|
|Who can initiate?||Transferor or Transferee||Legal heir or receiver|
|How is it affected?||A deliberate act of parties||Insolency, lunacy, death, or inheritance|
|Is there a consideration?||Yes||No|
|Is a transfer deed compulsory?||Yes||No|
|Is stamp duty compulsory?||Yes. Payable on the market value of shares||No|
|Who is liable?||Liability of transferor ceases to exist post the transfer||Original liability of shares continues to exist|
As per Section 56 of the Companies Act, 2013 read with Rule 11 of Companies (Share Capital & Debenture) Rules, 2014
It will be affected only if a proper instrument of transfer, in Form SH -4, as given in sub-rule 1 of Rule 11 of Companies (Share Capital & Debenture) Rules 2014 duly stamped, dated, and is executed by or on behalf of the transferor and the transferee and specifies all the details like name, address, occupation if any of the transferee. It has to be delivered to the company by either parties within 60 days from the date of execution along with a certificate of securities or letter of allotment of securities as available. If the transferor makes an application for the transfer of partly paid shares, then the company gives notice of the application Form SH-5 as given in sub-rule 3 of Rule 11 of Companies (Share Capital & Debentures) Rules 2014, to the transferee and the transferee must give no objection to the transfer within 2 weeks from the receipt of the notice.
It will be affected when the application of transmission of shares along with relevant documents is valid. Execution of transfer deed is not required. The following are the relevant documents for the transmission of shares
Every company must deliver the certificates of all securities transferred or transmitted within 1 month from the date of receipt of the instrument of transfer in case of transfer or intimation of transmission as applicable unless prohibited by any provision of law or any order of Court, Tribunal, or other authority.
Where any default is made in complying with the above, the company shall be punishable with a fine not be less than Rs. 25,000 but which may extend to Rs. 5,00,000, and every officer of the company who is in default shall be punishable with a fine not be less than Rs.10,000 but which may extend to Rs.1,00,000. While the transfer of shares and transmission of shares intend a change in ownership of the title of the shares, the distinction lies in the fact that the transfer of shares is voluntary and initiated by the transferee or transferor while transmission of shares is operational by law and is initiated by the legal representative or receiver.
Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.