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Understand the process of share transfer and transmission in private and public companies. Learn about documentation, legal provisions, and compliance with ROC in India.
5 May 2024
Afinthrive Advisory
Share transfer and transmission are two distinct processes related to the change of ownership of shares in a company. Share transfer involves the voluntary sale or gift of shares by a shareholder to another person, while transmission occurs due to operation of law, such as inheritance or court order after the shareholder’s death.
In a share transfer, the shareholder executes a transfer deed and obtains the approval of the company, which updates the register of members accordingly. The transfer process must comply with the company's Articles of Association and relevant provisions of the Companies Act, 2013.
Key points about share transfer and transmission:
Proper handling of share transfer and transmission is essential to maintain accurate ownership records and avoid disputes. It is advisable to seek professional guidance to ensure compliance with legal requirements and smooth ownership transition.
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Comprehensive insights into the processes and legalities involved in transferring and transmitting shares in a company.
Definition of Share Transfer
The voluntary process by which a shareholder sells or conveys their shares to another person through a formal instrument.
Definition of Share Transmission
The involuntary transfer of shares due to legal events such as death, insolvency, or operation of law, where shares pass to legal heirs or nominees.
Procedure for Share Transfer
Includes execution of a share transfer deed, delivery of share certificates, and approval by the company’s board within the stipulated time.
Restrictions on Transfer
Private companies may impose restrictions in their Articles of Association, including requiring board approval or pre-emptive rights to existing shareholders.
Transmission Process and Documentation
Legal heirs or nominees must submit relevant documents such as death certificate, succession certificate, or probate to claim shares.
Role of Board of Directors
The board reviews and approves share transfer applications and verifies the authenticity of documents in case of transmission.
Filing with Registrar of Companies
Companies must file necessary returns like PAS-3 to reflect share transfers in the official records maintained by the ROC.
Impact on Shareholder Rights
Transfer or transmission of shares results in the legal recognition of new shareholders who acquire associated rights such as voting and dividends.
Understanding the Process and Legalities
The process where ownership of shares is voluntarily transferred from one shareholder to another through sale or gift, requiring proper documentation and board approval.
The legal process of transferring shares due to the death or insolvency of a shareholder, typically involving legal heirs or nominees without the need for transfer deed execution.
Includes share transfer deed, share certificates, board resolution, and relevant forms like SH-4 for transfer and probate or succession certificate for transmission.
The company's registrar records the transfer or transmission of shares in the register of members and issues new share certificates to the transferee or legal heir.
Companies are legally required to update their records within a specified time (usually 30 days) to ensure rightful ownership and prevent disputes.
Get Answers to your most asked questions.
Share transfer is the process by which the ownership of shares is voluntarily transferred from one person to another.
Share transmission is the process of transferring shares due to operation of law, such as inheritance or succession after the death of a shareholder.
A share transfer can be initiated by the current shareholder (transferor) by executing a transfer deed and submitting it to the company.
Yes, most companies have the right to approve or refuse share transfers as per their Articles of Association.
Typically, a share transfer deed, share certificate, and Board approval are required for a valid share transfer.
For share transmission, documents like death certificate, legal heir certificate, succession certificate, or probate of will are usually required.
No, share transmission is not a sale, so no consideration or payment is involved.
Companies usually register share transfers within 30 days of receiving the transfer documents.
No, companies cannot refuse share transmission if the documents submitted are valid and complete as it is mandated by law.
Yes, share transfer deeds must be properly stamped as per the applicable stamp duty laws.
