Everything You Should Know for the Transmission of Shares according to the Indian Stock Market

In simple words, share transmission means a type of share transfer. However, it’s not what we might think in the general observation. Both share transmission and share transfer hint at the same process. They are, however, different. To understand more about their differences and to get share transmission done correctly, you can go through this post.

Transmission of Shares and Transfer of Shares: Where’s the Difference?  

Share transfer happens when the assets, i.e. shares a shareholder owns from a company, are transferred to another individual. Sometimes, share transfer may also happen from IEPF authority to a legal shareholder in case shares haven’t been claimed. This sort of transfer is known as unclaimed shares or dividend transfer. However, we are going to discuss one of the generalised share transfers in this post. To understand it, we need to know both these types of transfers, which are:

• Voluntary share transfer
• Involuntary share transfer

The term ‘transfer of shares’ generally means the voluntary share transfer where the shareholder willingly transfers the shares to another person. Involuntary share transfer, however, happens when the share is transferred if the shareholder is deceased or is considered an insolvent person. This is when the transmission of shares happens. Therefore, share transmission is actually the process of involuntary share transfer maintaining all the regulations of the law and inheritance facts with regulations. That said, you might also be eligible for transmission of shares even if you are not legally the heir to the shareholder. In case a shareholder decides to ‘gift’ a person his or her shares, and that’s declared in the will of the person, then you are entitled to get share transmission.

When Does Share Transmission Happen?

Share transmission happens in conditions when the shareholder has either passed away or is considered insolvent. This calls for the transmission of shares rather than share transfer because the shareholder is not involved in the transfer process.

• Death of the Shareholder
• Injury or major illness of the shareholder where  he/ she cannot be involved in the share transfer process
• Specific court orders might dictate the transfer of shares
• Share transmission takes place when the shareholder is considered insolvent for particular reasons.

Why Transmission of Shares Is Important

Transmission of shares is a vital process because:

• It helps redefine ownership of company shares.
• It may help in meaningful evaluation of the shares as well as their applications.
• It can serve as a valuable document for the shareholder who inherits it.

Compulsory Documentation for Share Transmission 

Read below to understand the documentation required and why the probate will serve an important purpose in share transmission.

• Original Death Certificate (if the person passed away)

The original death certificate has to be issued for shared transmission. It must also be attested by the nominee.

• No Objection Certificates (NOC)

No objection certificate is the certificate you will need from all heirs of the shareholder when they declare that they have no issue or complaints in you inheriting the shares. This, however, is standard regulation when for shares below Rs. 5 lakhs.

• Probate of Will 

When the shares are worth more than Rs. 5 lakhs, you will need to produce the Probate of Will as official documentation for the share transmission process.  The will dictates how the shares and assets are supposed to be distributed to the heir. The court can approve the will for you to qualify its authenticity as a document.

• Succession Certificate 

When the deceased has not left a will, yet you are the heir to the shares, then you are going to need a succession certificate. This condition is called an intestate. It is required to help you not only inherit the assets of the deceased shareholder but also manage his or her financial obligations such as debts etc. You will need to submit your documents to the high court or the district court to obtain a succession certificate.

• Letter of Administration (LOA)

This document is required when the deceased shareholder does not leave a valid will. The Letter of Administration helps the designated person (known as an administrator at this point) to look after the estate and shares of the deceased.

• Legal Heir Certificates/ Surviving Member Certificates

What if it’s unclear who the successor is of a deceased shareholder? In that case, you need to apply for a legal heir certificate or surviving member certificate that denotes the rightful person, to whom shares are going to be transmitted.

The Full Procedure of Share Transmission

Take a look below to find the process of share transmission in a few steps:

• Step 1: The Legal Heir or Nominee of the Deceased Submits the Legal 

With the demise or insolvency of the registered shareholder, the legal heir or the nominated candidate makes a request in writing to register himself or herself to perform the role of the holder of securities, which comes in aid for the Transmission of Securities.

• Step 2: The Company Delivers the Certificate of Securities 

Now it’s the job of the company to arrange a board meeting and approve the heir for share transmission. Once these formalities are done, the company endorses the Certificate of Securities. Here is where the updated share details are denoted.

• Step 3: The Company Makes Entries in the Register of Members and Debenture Holders

In this phase, the company makes required entries in the Register of Members or the Register of Debenture Holders to stick to the share transmission securities. This process is generally done within a week.

To Conclude: Get Transmission of Shares Faster with Us 

As you have probably understood, the process of share transmission might sound simple, but it has its impediments, glitches, and related issues. We at Infiny Solutions identified these complex problems or hiccups that may disrupt your shared transmission and cause considerable time lost from your life. Our professionals, therefore, streamline the process of the transmission of shares so that you get to obtain the shares you are entitled to get both quickly but correctly. Browse our website to learn more of our services dedicated to making legal procedures like share transfer and transmission (and more) easier.