Difference Between Transfer and Transmission of Shares

A transfer is known as an act of movement of an asset, and for shares, this movement is voluntary or operational by law. When the movement of shares is a voluntary act^[1] by the holder of shares and takes place by way of contract, then it is called Transfer of Shares. In contrast, when the movement of shares takes place due to operation of law, on the death of the shareholder or if he becomes insolvent or lunatic, then such movement is called Transmission of Shares. It is the most fundamental difference between the Transfer and Transmission of Shares. In this blog, we will find all the differences between them. 

Introduction to Transfer and Transmission of Shares

The most important feature of shares is that they are transferable because it facilitates a company or corporation in acquiring permanent capital and liquid investments to the shareholders. The transferability of shares can be seen in two different ways, and they are commonly known as Transfer of Shares and Transmission of Shares. These two differ from each other in many ways, including their meaning and concept. Transfer of shares is an entirely voluntary act of a member, whereas Transmission of shares occurs due to the operation of law.

Transfer of Shares

When the transfer of title and ownership of shares is done voluntarily or intentionally between the transferor and the transferee is called Transfer of Shares, where the transferor is the one who transfers his shares and the transferee is the one who receives such transferred shares. The shares of a public company are freely transferred unless that company has a valid reason to disallow such transfer. However, shares of the private company are not transferable, and a transfer deed is executed for the transfer of shares, but there are some exceptions to it.

Transmission of Shares

In the case where the shareholder is dead or has become lunatic or insolvent, the Transmission of Shares is done by the operation of law. In a case where the shareholder is a company that has already wound up there, also Transmission of shares takes place. There is no use for execution of the transfer deed, and the transferee is given the right over shares. Transmission is recorded only if the transferee provides proof of entitlement to the shares. In case of death of a shareholder, shares are transferred to legal representatives, and in case of insolvency of a shareholder, the shares are transferred to an official assignee.

And thus, the Transfer and Transmission of Shares differ from each other even in their definition/introduction also. 

Difference between Transfer and Transmission of Shares

Transfer of Shares and Transmission of Shares differ in all ways, from meaning and concept to the manner of their execution and use of instruments. Transfer of Shares requires instruments of transfer, whereas Transmission of shares requires no instrument.

We already know that they differ in their meaning and in the manners of transfer of shares under each of them. Here, the following is the list of differences between the Transfer and Transmission of Shares:

Parties

In Transfer of Shares, the transfer of title of shares is done voluntarily by one party to another, and in Transmission of Shares, the title of shares is transferred by operation of law. In the Transfer of Shares, the transfer is done inter vivos, i.e., between two living beings, and they act deliberately, whereas the Transmission of Shares is affected by insolvency, death, inheritance, succession or lunacy of the parties. Transfer of Shares is initiated by transferor and transferee, while legal heirs or receivers initiate Transmission of Shares.

Consideration and Liabilities

Adequate consideration must be there in the case of Transfer of Shares, whereas in the case of Transmission of Shares, no such consideration is paid.

The difference between liabilities of Transfer and Transmission of Shares is such that in Transfer of Shares, liabilities of the transferor cease the moment the transfer is completed, i.e., the liabilities immediately transfer to the transferor from the transferee after transfer. While in the case of Transmission of Shares, the original liability of shares continues to exist.

Procedure

In Transfer of Shares, an application which the transferor and transferee sign is made to the company to transfer, and the director of that company decides whether to approve such application or not. In Transmission of Shares, the person in whose name shares is transferred gives proof that he is a legal representative, assignee, etc., of the concerned member or shareholder.

Stamp Duty

The basic difference between Transfer and Transmission of Shares relating to stamp duty is that stamp duty is payable on market value of shares in the case of Transfer of Shares, whereas there is no need for payment of any Stamp Duty in the Transmission of Shares.

Execution, Instrument and Nature

There must be an execution of a valid transfer deed in the case of Transfer of Shares, whereas there is no such requirement in the case of Transmission of Shares. Transfer of Shares is voluntary, and Transmission of Shares is Compulsory.

Transfer of Shares is a voluntary act, while Transmission of Shares is a compulsory act.

Lock in Period

The Lock-in Period is permissible in the Transfer of Shares whereas not in the Transmission of Shares.

Conclusion

Concluding the whole information provided here, we get that Transfer of Shares is similar to the ordinary course of the transfer, while the Transmission of Shares takes place only on death, insolvency or lunacy of a shareholder. There is a vast range of differences between the Transfer and Transmission of Shares. Transfer of Shares is a very common form of transfer where two living parties are involved. Transmission of Shares is not a common form of transfer; it involves legal representatives, etc. Transmission of Shares involves the operation of law, succession or inheritance, and there is no need for any instrument, while in another one, a transfer deed is a must. Even in the Transfer of Shares, consideration is a must, while no consideration is required in Transmission. The only similarity between the Transfer and Transmission of Shares is that they are a form of transfer for shareholder shares.

Read our Article:Share Transfer: Underlining Key Facts and Legalities