TRANSMISSION OF SHARES

Transmission of shares means transfer of property or title of shares by operation of law.

This type of transfer of shares may be called Involuntary assignment of shares. Situations like death of a shareholder, on insolvency of a share holder, on lunacy of shareholder demand for transmission of shares. A person becoming entitled to shares on transmission shall have the same rights as that of original member provided he registers, until then he / she cannot exercise the right to attend any meetings of company as a member.

Distinction B/W Transfer and Transmission of shares

Transfer of shares is effected by deliberate act of parties, whereas transmission of shares takes place by operation of law on happening of certain event ,viz. , death, insolvency or lunacy of owner.
Transfer of shares requires the execution of a formal instrument of transfer, whereas transmission of shares requires an evidence (succession certificate) showing the entitlement of legal representative. There must be an adequate consideration for the transfer of shares unless they are transferred by the way of gift, whereas the question of consideration does not arise in case of transmission.

Stamp duty is payable on market value of shares, in case of transfer of shares through an instrument of transfer, but not in case of transmission of shares.

Procedure for Transmission of shares

There are two alternatives open to a legal representative : He may get himself registered as member of the company, or He may transfer the shares to some other person.

In case the legal representative opts to be registered as a member of the company, he will have to request the same to the company. The relevant share certificate and succession certificate are attached with the application.

On being satisfied with genuineness of documents, the company will delete the name of deceased member and place the name of legal representative in Registers of members.
A new Share Certificate is issued on his name, entitling him all rights of a member.

In case the person opts for transfer of shares, the usual procedure for transfer of shares is followed except that Succession Certificate is reqd. In case of death of any joint- holder, the survivor or survivors shall continue to own the shares and interest of deceased joint-holder and does not pass to his legal representative.

Nomination of Shares and Debentures

Newly introduced section 109A in The Companies (Amendment) Act, 1999 , provides the rules governing nomination of shares and debentures as follows : Every shareholder of a company may , at any time, nominate any person for inheriting entitlement of his shares, in event of his death.

In case of joint-holders, they can collectively nominate person ,for entitlement, in case of death of all the joint-holders.
Such nomination will supersede the law of succession or any Will and in case of death of sole shareholder or joint-holders nominee will be entitled the owner of shares over the legal Heir of the deceased.

A nomination can be altered or cancelled by the holder at any point of time. In case of the nominee being a minor, the shareholder is also obliged to appoint a guardian(second nominee). This guardian will be entitled authority of shares until the minor comes of age. Also, in case of death of death of minor, the guardian becomes the alternative nominee.

Restrictions/Rules for nomination

Nomination can be made by individuals only, on their own behalf , singly or jointly If shares or debentures are held jointly, then all joint-holders will sign the nomination form. Nomination should be made in favor of only individuals. The nominee should not be a trust, society, body corporate, or partnership firm. The individual nominee need not be an adult, it can be a minor also. Nomination stands rescinded upon transfer of shares or debentures.

Rights of Nominee after Transmission of Shares & Debentures

There are two alternatives open to a nominee . Either , he may get himself registered as the security holder ,or He may transfer the securities to some other person.

In case the nominee elects to be registered as the security holder himself ,he will send the notice in writing for the same to the company. The relevant share/debenture certificate and the death certificate are to be attached to the notice. Until he is registered , he will be entitled to all advantages as to dividend but cannot attend any of the company meetings.

If he opts to transfer of shares or debentures, he will have to follow the usual procedure of transfer of shares or debentures , with the diff. that he will be reqd. to attach one more document, i.e. , the death certificate , with the instrument of transfer.

If he does not opts for any of the alternative, The board of Directors send a notice to him asking for a decision in the matter , If he does not comply within 90 days, the company may withhold the payment of dividend, bonus or other money payble in respect of shares or debentures, until the requirements of the notice have been complied with.