Shares means share in ownership of the Company. When a company gets started, there are original shareholders at the time of registration of the company. It is not mandatory that the same shareholders will continue lifetime, shares gets transferred from one shareholder to another due to many reasons. This is natural process. You might come across the word transfer of shares multiple times. But one more concept has vogue. Transmission of shares. Transmission of shares means whenever there is sudden death of the director or shareholder, in such event the ownership of shares passes on to legal heirs. Procedure for transmission of shares is laid down in sec 56 of the Companies Act, 2013.
Life is uncertain. It is very common to arise a question that in case of death of shareholder, what happens to their shares. The answer is Transmission of shares. On death of shareholders, the shares are directly transferred to the legal heirs of the deceased shareholder. The legal heirs are required to submit request letter supported by death certificate and original share certificates of the deceased shareholder. On transmission of shares the person to whom shares are transferred, becomes the new registered shareholder.
The legal provisions governing transmission of shares are elaborated in sec 56 of Companies Act, 2013. Articles of Association of the company consists of set of rules and regulations for transfer and transmission of shares.
The procedure of transmission of shares requires following documents to be submitted-
If the shares are in demat account then the survivor needs to submit following documents-
Note: If the value is more than Rs 2 lacs the Depository Participants (DP) may insist to submit more documents apart from above as below
In case if shares are in physical form the Share transfer agent any ask following documents to submit in procedure for transmission of shares-
Yes partially it is correct. When a shareholder dies, it is an automatic process. The shares of the deceased shareholder are automatically transmitted to their legal heirs. It is the responsibility of legal heirs to submit required documents of transmission and get the legal part completed.
Following basic steps needs to be followed for transmission of shares as per sec 56 of the Companies Act, 2013 and other applicable provisions if any.
Step 1: Application by Survivor
The survivor is required to apply for transmission of shares by providing death certificate of the deceased shareholder. In case of joint holding of shares or joint legal heirs as the case may be who desires to get the transmission process done by operation of law needs to simply file an application with the company by submission of required documents.
Once the survivor submits the documents with the company, the next step is verification of documents by the company. The company will review basic documents like death certificate, Succession Certificate etc. If the company is satisfied that the documents submitted are in order, it may approve the transmission request. It may be noted that if the company finds that the documents are not in order, it may refuse the transmission request and intimate within 30 days from the date of transmission request communicate such refusal to the concerned person.
Execution of transfer deed is not required in case of transmission of share. Valid documents is enough for share transmission process. As transfer deed is not mandatory then the question of payment of stamp duty does not arises.
On transmission of shares the liability of shares continue to be subject to 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.
As the process of transmission of shares is by operation of law, stamp duty payment or payment of consideration amount is not required at all.
Once the entire share transfer procedure is complied, new share certificates need to be issued within 1 month unless prohibited by any provision of law or of any order of any Court, Tribunal or other authority.
No. There is no time limit for transmission of shares. The survivor can anytime make an application with the company for transmission of shares. Transmission of shares cannot be denied even during lock in period of shares.
Yes. A legal representative can directly transfer shares of deceased shareholder to third party instead of getting transmitted in his name as specifically permitted under Section 56(5) of the Companies Act, 2013.
Person entitled to shares is entitled to dividends and other advantages of Shares. A legal Representative can attend General Meeting and vote only after his name is registered as a member.
If the person does not transfers shares or does not elect to become shareholder of the company then in such a case, company can issue notice to concerned person to either register himself or transfer the shares. If the concerned person does not complies within 90 days, board of directors can keep on hold payment of dividend, bonus or any other payables till he shows cause for notice.
Prabate means, if a shareholder dies and leaves behind his will or letter of administration then in such a case survivor shall get the “Will” certified under the seal of court of jurisdiction. This certified ‘will’ is called as probate. Succession certificate is not mandatory where probate document is available.
Where a member dies without ‘will’ then in such case succession certificate issued by a Court of competent jurisdiction. Once succession certificate is granted, it provides full indemnity to the company regarding transmission of shares.
If it is found that any person in fraudulent way is guilty, it hall be punishable with imprisonment for a term which shall not be less than 6 months but which may extend to 10 years and shall also be liable to fine which shall not be less than the amount involved in fraud, but which may extend to three times the amount involved in fraud.
