Transmission of shares is a process by operation of law where under the Shares are registered in a Company in the name of deceased person or an insolvent person are registered in the name of his legal heirs by the Company on proof of death or insolvency as the case may be.
Transmission of shares takes place when registered member dies or is adjudicated insolvent or lunatic by competent court.
Article of the Company usually provides the provisions of Transmission of shares. In absence of such provisions, Company will follow Regulations 23to 27 of Table F to govern the provision of Transmission of shares.
As per the above regulations, legal representatives are entitled to the shares held by the deceased person and company must accept the evidence of Succession.
What is Evidence of Succession?
Letter of Administrations
Evidence acquired by Board of Directors
Important Note: Such a legal Representative is however not the member of the Company but the legal owner of the Shares.
But he may apply to be registered as a member.
ON THE CONTRARY,
Instead of registered as a member, he may make transfer the shares as the deceased or insolvent member could have made.
Point to be noted: The Board of Directors also have the right to decline registration as they would have had in case of transfer of shares before death. But if Company refuses transmission, same remedies are available to legal representative as that in case of transfer, namely appeal to the Tribunal under section 58.
CASE LAW: Life Insurance Corporation of India v Bokaro & Ramgur Ltd.
It is not necessary to have instrument of Transfer executed for purpose of Transmission of shares.
Interpretation: Where title to the shares comes to vest in another person by operation of law, it is not necessary to submit transfer form.
Whether Transmission of shares will subject to any Liability?
Yes, in case of transmission of shares, shares continue to be subject to the original liabilities and if there was lien on shares on any sum due, such lien would subsist.
Important documents required for transmission of Shares:-
Certified Copy of death certificate
Specimen Signature of Successor.
CASE LAW: THENAPPA CHETTIAR V INDIAN OVERSEAS BANK LIMITED
Where succession certificates have been granted in respect of shares, the Company cannot insist on production of probate or letter of Administration.
Important Note: Since the Transmission is by the operation by law, so neither the stamp duty nor consideration is required on instrument of transmission.
Transmission in case of Joint Shareholding: Regulation 23 of Table F provides that on death of a member where he was joint shareholder, the survivors or survivor shall be the only persons recognized by the Company. The legal heirs of deceased member are not entitled to get registered as joint holder along with surviving holder.
Modes of Transmission of Shares:-
The Survivors in case of joint shareholding can get the share transmitted on production of the death certificate of deceased shareholder.
If the member of the Company dies and leaves after him a will or letter of administration then survivor shall get the copy of will certified under the seal of the Court. The certified copy of will is called a probate and it shall be forwarded to the Company.
If Member of the Company dies without leaving a Will, then succession certificate issued by the Court shall be issued to the Company.
Transmission in case of small shareholding
Transfer may be considered and affected by the Company without obtaining succession certificate. The Board of Directors shall ensure that sufficient evidence has been produced by the legal heirs.
Following documents shall be submitted to the Company:-
Certified copy of death certificate
Particulars and signature of all legal heirs
Affidavit on non-judicial stamp paper certified by a first class magistrate or notary public
Deed of Disclaimer
Indemnity bond on non-judicial stamp paper
Pan of legal heir.
Whether legal representative is entitled for receiving dividends, Bonus shares or right shares?
Yes, As per Regulation 24 of Table F, A person entitled to a Share by the reason of death or insolvency of the holder shall be entitled to the same dividends and other advantage to which he would be entitled if he were the registered holder of the Shares.
Important Note: The legal Representative of a deceased member shall not be entitled to exercise voting rights or other rights in a general meeting unless he is registered as a member in respect of the Shares.
Transmission in case of Amalgamation: The transfer of shares in case of Amalgamation does not require execution on instrument of transfer or any other formalities as per section 56 of the Act.
But in case of Transmission of shares by operation of law, by virtue of an High court order on sanctioning the scheme of amalgamation, all assets and liabilities of the transferor company vest by operation of law in transferee company.
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