Transfer and Transmission, these two words sound so similar. But there meaning as per Companies Act, 2013 is altogether different.

In this write up, we will discuss in detail about Transfer and Transmission of Securities.

Transfer of securities

An intentional transfer of securities from one party to another party is known as transfer of securities wherein a proper instrument of transfer is required which is duly stamped, dated and executed by or on behalf of the transferor and the transferee.

This letter of instrument has to be delivered to the company by the transferor or the transferee within a period of sixty days from the date of execution, along with the certificate relating to the securities, or if no such certificate is in existence, along with the letter of allotment of securities.

An instrument of transfer of securities held in physical form shall be in Form No.SH.4 and every instrument of transfer with the date of its execution specified thereon shall be delivered to the company within sixty days from the date of such execution.

Link for downloading Form SH-4:

https://taxguru.in/wp-content/uploads/2020/07/Form-No.-SH-4-Securities-Transfer-Form.pdf

What if the instrument of Transfer has been lost or has not been delivered within stipulated time i.e. 60 days??

In such case the company may register the transfer on such terms as to indemnity as the Board may think fit.

What if the application is made only by the transferor for partly paid shares??

If an application is made by the transferor alone and relates to partly paid shares, the transfer shall not be registered, unless the company gives the notice of the application, in Form SH-5 to the transferee and the transferee gives no objection to the transfer within two weeks from the receipt of notice.

Form SH-5 can be downloaded by clicking the following link.

https://taxguru.in/wp-content/uploads/2020/07/Form-No.-SH-5-Notice-for-transfer-of-partly-paid-securities.pdf

Transmission of Securities

Where shares are transferred due to operation of law, it is known as transmission of securities i.e. in case if the member passes away or becomes insolvent/lunatic.

Documents required for Transmission of Shares:

  • Certified copy of death certificate
  • Succession certificate
  • Probate
  • Specimen signature of the successor

Meaning of ‘Probate’

If a member of a company dies and he leaves after him a will or letter of administration then the survivors shall get a copy of ‘will’ certified under the seal of a Court of competent jurisdiction. The certified copy of the will is called a ‘probate’. Succession certificate is not required when probate or letter of administration is issued.

Power of refusal to register transmission of shares is to be exercised by the company within thirty (30) days from the date on which the intimation of transmission is delivered to the company.

Time period for delivering the certificates of all securities allotted, transferred or transmitted:

Time period Cases
Within 2 months from the date of incorporation in the case of subscribers to the memorandum
Within 2 months from the date of allotment in the case of any allotment of any of its shares
Within 1 month from the date of receipt by the company of the instrument of transfer or intimation of transmission, as already discussed in the case of a transfer or transmission of securities
Within 6 months from the date of allotment in the case of any allotment of debenture

Let’s summarize above discussion in a comparative form:

Basis Transfer of securities Transmission of securities
Definition Transfer of shares means intentionally transfer of title to shares. Transmission of shares occurs due to operation of law.
Reason It is done voluntarily It occurs due to Insolvency, death, inheritance or lunacy of the member.
Execution of valid transfer deed Yes No
Stamp duty Payable on the market value of shares. No such requirement
Initiated by Transferor and transferee Legal heir or receiver

Penal Provision:

The Company shall be punishable with fine Rs. 25,000 – 5 lacs, and

every officer of the company who is in default shall be punishable with fine Rs. 10,000 – 1 lakh

References:
Section 56 of Companies Act, 2013
Rule 11 of The Companies (Share Capital and Debentures) Rules, 2014

Disclaimer: The entire contents of this article is solely for information purpose and have been prepared based on relevant provisions and as per the information existing at the time of the preparation. It doesn’t constitute professional advice or a formal recommendation. The author has undertaken utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information’s provided herein above.

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