Transmission of Shares in the Interim Period

Transmission of Shares in the interim period is a crucial legal procedure that mainly takes place when a shareholder’s ownership needs to shift due to some situations such as death, mental incapacitation, or insolvency. Section 56 and 59 of Company Act, 2013 ensure that the shares are accurately and legally transferred to the lawful successor or heirs. Share transmission is compelled by legislation and is not voluntary, like share transfers.

During this period, there may be several challenges, including document authentication and regulatory compliance requirements, which can cause disruptions in operations if not properly addressed. However, it is essential to comply with statutory requirements to facilitate a hassle-free transition and aids to maintain corporate governance. At Bizfoc, our expert guidance and approaches ensure your business operations remain uninterrupted during this critical time.

Difference between Transmission of Shares and Transfer of Shares

Transmission of shares is a legal procedure through which the shares ownership is transferred to another person (legal heir of the shareholder) in some circumstances such as death, insolvency, or mental incapacitation of the shareholder.

The terms “Transfer of shares” and "Transmission of shares” cause confusion that are very different from each other. “Transfer of shares is a voluntary sale or transfer of shares to another one. It is a transaction by which the owner of the shares (the transferor) transfers ownership of the shares to another person (the transferee).

However, transmission of shares is involuntary and governed under legal provisions. This legal process ensures that the shares are transferred to the rightful successor or legal heir as mentioned by law after a thorough verification. This process protects the rights of heirs or legal successors when the original shareholder cannot hold the shares anymore.

Legal Framework for Transmission of Shares

Sections 56, 58, and 59 of Company Act, 2013 outlines the legal framework for Transmission of shares in India. The explanation is as follows:

Section 56 of Company’s Act: This section outlines the procedure of the transfer and transmission of securities. It specifies that if an appropriate document of transfer is presented, duly stamped, and executed by the transferor and transferee, a corporation is not permitted to record a transfer of shares.

Section 58 of Company’s Act: This section deals with refusal of registration and appeals against refusal. In case the company declines to register their transfer, the victim can appeal to the court.

Section 59 of Company’s Act: This section provides for the correction of the membership register if a company fails to properly register a shipment.

Required Documents for Transmission of Shares

The required documents for the transmission of shares are as follows:

• Death Certificate
• Succession Certificate
• Duly signed transmission request form by the nominee
• Indemnity Bond
• NOC from other lawful heirs
• Transmission request form
• Identity proof of the Successor
• Will copy (if applicable)

Stepwise Procedure of Transmission of Share in the Interim Period

The transmission of shares in the interim period includes a stepwise procedure. Here is the detailed explanation of each step given below:

• Step 1: Notification to the Company
  If any shareholder passes away or faces mental incapacitation, the legal heirs must notify the company. This is a notification to the company about the ownership rights changes and initiates the process of share transmission.

• Step 2: Document Submissions
  The legal heir needs to gather all the appropriate documents that are required during the transmission of shares. It basically includes the death certificate, succession certificate, original share certificates, NOC, indemnity bond, and other relevant documents.

• Step 3: Verification Procedure
  Once the documents are submitted, the company starts the verification procedure. In this step, the company scrutinizes the submitted documents to verify the authenticity of the legal heir. It also ensures that compliance and requirements are met. The company may also verify the identity of the successor and confirm the validity.

• Step 4: Board Resolutions
  When the verification procedure is successfully completed, the issue is brought before the company’s board of directors. Here, they review the matter and decide to approve the transfer of shares from the deceased shareholder to their heir or successor. This board resolution formally recognizes and approves the ownership transfer.

• Step 5: Issuance of New Share Certificates
  Once the board resolves the issue, the company proceeds to issue new share certificates in the legal heir’s name. These new share certificates replace the originals of the deceased shareholder and legally recognize the right of the new owner to the shares.

• Step 6: Updating the Register of Members
  At the end, the company updates its register of members to change the ownership rights. The company's formal record, the register of members, lists all of its present shareholders along with their relative shareholdings. To appropriately reflect the legal ownership status of the company's shares, this register must be kept up to date.

Transmission of Shares without Succession Certificate

Without the succession certificate, the transmission of shares can be possible if the deceased left a will. In this scenario, the legal heir must provide the death certificate, the will, and a probate order (a court certification of will validity) to the company.

In some cases, if there is no will, other documents may be required such as a legal heir certificate or an indemnity bond. After reviewing these documents, the board of directors of the company will determine that the shares are legal and won't require a succession certificate to be transferred to the rightful heir. This procedure guarantees smooth ownership transfer and compliance with the law.

Importance of Professional Guidance by Bizfoc

Seeking professional guidance throughout the share transmission is crucial for several reasons:

1. Expert in Legal Requirements: Professionals have the experience to handle all legal complications through their comprehensive knowledge of legal procedures and requirements, ensuring compliance and avoiding legal complications.
2. Efficient Documentations: Professionals assist in the appropriate preparation of documents, reducing the chances of errors and rejections.
3. Dispute Resolution: They mediate and resolve disputes among legal heirs and the company, ensuring a hassle-free procedure.
4. Risk Mitigation: Professional guidance helps assess and mitigate risks and challenges during share transmission, such as document issues and disputes.

How BizFoc can Assist?

Bizfoc offers comprehensive services that simplify the transfer of shares. Our team of experts ensures all necessary documents are in order, provides expert legal advice, ensures compliance with laws and regulations, expedites the process with regulatory authorities, and resolves disputes. From notification to final registration, BizFoc supports a smooth transition of ownership.

Conclusion

The Transmission of shares in the interim period is a critical and complex procedure that requires expert management and legal compliances. Sustaining business operations and protecting the legal heir/ successor’s rights require swift and effective problem solving. At BizFoc, our expertise and thorough services guarantee a smooth transmission procedure and give peace of mind to our client. Connect with BizFoc today and get expert guidance to navigate the complexities of transmission of shares and ensure a smooth transition.

Frequently Asked Questions