Difference Between Transfer and Transmission of Shares

Though transfer and transmission of shares in layman’s terminology suggest a title ownership change. But they are not; the transfer of shares is voluntary, and the transferor and transferee initiate it. In comparison, the transmission of shares is operational by law and is usually initiated by the legal representative or the receiver. Explaining this more elaborately, the transfer of shares refers to an action that involves moving assets for shares. The shares are said to be transferred when they are moved voluntarily by the shareholder as per a written agreement. 

Similarly, the movement of shares or transmission of shares occurs by the operation of law in the instance of the shareholder’s death or in the situation where the holder becomes lunatic or insolvent. Thus, to learn more about the difference between the transfer and transmission of shares, this article will provide a more in-depth explanation.

What is the transfer of shares?

The transfer of shares means the intentional transfer of the title of the shares between the transferor and the transferee. The shares of a public company are freely transferable unless the company has sufficient reasons to forbid the same. But the private limited company’s shares cannot be transferred as easily as the public sector company.

Transfer of Shares as per the rule of Section 56 of the Companies Act

As per section 56 of the Companies Act 2013, read with Rule 11 of Companies Rules 2014, the transfer of share provision is:

The transfer of shares will take effect only if an appropriate instrument of transfer in the Form SH-4 as specified in the sub-rule 1 of Rule 11 of the companies (Share Capital and Debentures) Rules 2014 is executed by or on behalf of the transferor and the transferee. It comprises all the required information, such as the transferor’s name, address, and occupation. It must be presented to the company by one of the parties within 60 days from the date of execution, along with a certificate of the securities or letter of allocation of the securities.

Moreover, if the transferor attempts to apply for the transfer of partially paid shares, the company shall notify the transferee of the application using the Form SH-5 as specified in the sub-rule 3 of Rule 11 ( Share Capital and Debentures) Rules 2014, and upon getting such notice, the transferee will have 2 weeks from the date of receipt of such notice to file the no objection certificate for transfer.

What is Share Transmission

The transmission of shares occurs when the holder’s death occurs, or the holder becomes lunatic or insolvent. In this instance of transmission of shares, no transfer deed is executed, and the transferee will be awarded the right to the shares. The transmission of shares is recorded only when the transferee provides proof of entitlement. Furthermore, the shares will be transferred to the legal representative in the instance of the death of the shareholder or if the official assignee becomes insolvent.

Transmission of Shares as per the rule of Section 56 of the Companies Act

The provision for the transfer of shares as per the rule of Section 56 of the Companies Act are:

The transmission of shares will occur when the application for transmission of shares along with the relevant documents is approved, and thus it will be impacted. In this case, the execution of the transfer deed is not necessary, and the below mentioned following documents are relevant documents that are required for the transmission of shares:

•Copy of death certificate

• Signature of the successor

•Self-attested copy of Pan Card

•Probate of will/Succession certificate/ Letter of administration/ Court Order

Difference between Transfer and Transmission of Share

From our above discussion, you might have some knowledge about the transfer and transmission of shares and the provision for them as per the rule of Section 56 of the Companies Act. To know more about the difference between them explicitly, the below-discussed table would provide some information:

Details	Transfer of Shares	Transmission of Shares
What is it	It is a voluntary act that describes freely given title to shares by one person or party to another.	It is a legal transfer of ownership of shares.
How it happens	When the shareholder deliberately transfers the share to the other person or party	It occurs in the case when the death of the owner of the share takes place or the owner of the share becomes lunatic or insolvent.
How the process is carried out	Both parties carry out the process of transfer of shares through the execution of a legal transfer deed.	In this case, the process of transfer of shares is carried out by the heir, successor or legal receiver of the shares.
Change in liability	Once the process of transfer is completed, the obligation          ( liability) of the transferor is discharged.	After the transmission of shares, the original obligation                ( liability) remains in force.
Stamp duty payment	In the transfer of shares, the stamp duty has to be paid	There is no requirement to pay stamp duty
Is a transfer deed required?	Here, there is a requirement for a valid transfer deed while initiating the process of the transfer of shares.	There is no need for the execution of a valid transfer deed.
Is a transfer deed required?	There is a requirement for consideration at the time of the transfer of shares.	There is no requirement for consideration, and nothing is given in exchange.

Penalty in case of non-compliance

In case of non-compliance with Section 56 of the Companies Act 2013, the company shall be punishable under law with a fine amounting to no less than Rs 25,000. Still, it may be extended to Rs 50,000, and each company officer who is in default shall also be punishable with a fine not less than Rs 10,000, and it may be extended to Rs 100,000.

Conclusion

Thus, the transfer and transmission of shares refer to a change in ownership of share titles. But they differ in the terms that the transfer of shares is voluntary, and it occurs when the transferee or transferor initiates it. Whereas the transmission of shares occurs when the death of the original owner of the share title occurs or they become lunatic or insolvent, and it is operational by the law and is initiated by the receiver of the shares or legal representative.