One of the most important features of the securities is that they are transferable, which facilitates the company in acquiring permanent capital and liquid investments to the shareholders. Transfer of shares is a voluntary act of a member that takes place by way of contract. It is not exactly same as transmission of shares, as the two differ in their meaning and concept as well. The transmission of shares occurs due to the operation of law i.e. in case if the member passes away or becomes insolvent/lunatic.
Transfer of shares requires and instrument of transfer, whereas no such instrument is required in the transmission of shares. To further understand, the difference between transfer and transmission of shares, you need to have a glance at the article excerpt, provided below.
Content: Transfer of Shares Vs Transmission of Shares
|Basis for Comparison||Transfer of shares||Transmission of shares|
|Meaning||Transfer of shares refers to the transfer of title to shares, voluntarily, by one party to another.||Transmission of shares means the transfer of title to shares by the operation of law.|
|Affected by||Deliberate act of parties.||Insolvency, death, inheritance or lunacy of the member.|
|Initiated by||Transferor and transferee||Legal heir or receiver|
|Consideration||Adequate consideration must be there.||No consideration is paid.|
|Execution of valid transfer deed||Yes||No|
|Liability||Liabilities of transferor cease on the completion of transfer.||Original liability of shares continues to exist.|
|Stamp duty||Payable on the market value of shares.||No need to pay.|
Definition of Transfer of Shares
Transfer of shares refers to the intentional transfer of title (rights as well as duties) to shares by one person to another. There are two parties to transfer of shares, i.e. transferor and transferee.
The shares of the public company are freely transferable unless there is an express restriction provided in the articles of association. However, the company can refuse the transfer of shares, if it has a valid reason for the same. In the case of a private company, there is a restriction on the transfer of shares subject to certain exceptions.
Definition of Transmission of Shares
There are some cases when the transfer of shares occurs due to the operation of law, i.e. when the registered shareholder is no more, or when he is insolvent or lunatic. Transmission of shares also occurs when the shares are held by a company, and it is wound up.
The shares are transferred to the legal representative of the deceased and the official assignee of the insolvent. The transmission is recorded by the company when the transferee gives the proof of entitlement of shares.
Key Differences Between Transfer and Transmission of Shares
The significant differences between transfer and transmission of shares are provided below:
- When the shares are transferred by one party to another party, voluntarily, it is known as transfer of shares. When the transfer of shares happens due to the operation of law, it is referred to as transmission of shares.
- Transfer of shares is done intentionally whereas death, bankruptcy and lunacy are the reasons for transmission of shares.
- The transfer of shares is initiated by the parties to transfer, i.e. transferor and transferee. Unlike transmission of shares which is initiated by the legal representative of the concerned member.
- Transferee pays an adequate consideration to the transferor for the transfer of shares. In the case of transmission of shares, no consideration shall be paid.
- Execution of valid transfer deed is necessary when there is the transfer of shares, but not in the transmission of shares.
- When the transfer is completed, the liability of the transferor is over. On the other hand, the original liability of shares exists.
- Stamp duty is payable on the market value of shares in case of transfer while in the transmission of shares no stamp duty is to be paid.
By and larger, transfer of shares is the normal course of transferring property, while the transmission of shares takes place only on demise or insolvency of the shareholder. Moreover, Transfer of shares is very common, but the transmission of shares takes place only on the happening of the certain event.
Charles Sarkodie says
Read the above with much interest and my question is with regard to the transmission of shares — when a company is dissolved can the shares be transmitted upon the death of a deceased shareholder ?
Amiruddin Khan says
Ofcourse it is also mentioned incase of insolvency the transmission of the share takes place by the legl heir
Jeewan Mittal says
In full partition of HUF shareholding of huf is awarded to co-parceners, You need to pay stamp duty or not ?