Shares Transmission

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Shares Transmission

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Overview

In the evolving world of Indian corporate governance, ownership of shares in private limited companies can undergo transformations beyond the usual voluntary transfer. This guide delves into the concept of shares transmission, as defined by the Companies Act, 2013, equipping you with the knowledge and steps to navigate this process with confidence and adherence to legal requirements.
Understanding Transmission:

Shares transmission differs from a regular share transfer in its nature. While transfer involves a deliberate transaction between living individuals, transmission occurs due to unforeseen circumstances beyond the control of the original shareholder, typically triggered by:

• Death: Upon a shareholder’s demise, their shares are transmitted to their legal heirs as per succession laws.

• Insolvency/Bankruptcy: If a shareholder becomes insolvent, their shares may be transmitted to the creditors or liquidator as part of debt settlement.

• Gift: Though less frequent, shares can be transmitted through a valid gift deed, legally documented and accepted by the company.

Eligibility and Requirements:

While the triggering events for transmission are beyond individual control, the process necessitates specific steps and documents for a smooth and legally valid transition:

• Proof of Transmission Event: Provide documented evidence of the triggering event, such as a death certificate, insolvency order, or a registered gift deed.

• Claimant Identification: Legal heirs, creditors, or beneficiaries claiming the transmitted shares must prove their eligibility with documents like succession certificates, loan agreements, or gift deed verification.

• Company Compliance: The company itself must acknowledge the transmission and update its share register accordingly. This typically involves submission of relevant documents and payment of prescribed fees.

Detailed Step-wise Procedure:

• Gather Documents: Assemble all necessary proofs of the transmission event and claimant eligibility, including share certificates, legal documents, and company-specific forms.

• Intimation to Company: Inform the company secretary of the transmission event in writing, providing copies of required documents.

• Formalities and Fees: Obtain and complete the designated form (typically Form SH-6) for share transmission and submit it to the company along with prescribed fees.

• Share Register Update: Upon verification, the company updates its share register to reflect the new ownership structure.

• Issuance of New Certificates: The company issues new share certificates to the legal heirs, creditors, or beneficiaries as applicable.

Key Features and Benefits:

Shares transmission, though triggered by unforeseen circumstances, offers several benefits:

• Legal Continuity: Ensures deceased shareholder’s ownership interest is legally transferred to rightful successors, maintaining responsible shareholding.

• Debt Resolution: Facilitates settlement of outstanding debts or obligations linked to the shares, promoting financial integrity within the company.

• Transparency and Accuracy: Updating the share register with accurate ownership information builds trust and enhances corporate governance.

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Common Questions

Most Popular Questions


What is shares transmission in a private limited company?




Shares transmission refers to the process of transferring ownership of shares to legal heirs or successors of a deceased shareholder, enabling them to inherit the rights and responsibilities associated with the shares.


Shares transmission occurs upon the death of a shareholder, triggering the transfer of shares to their legal heirs or successors as per applicable laws of succession.


The procedure typically involves obtaining legal heirship certificate or succession certificate, obtaining board approval, updating company records, and filing necessary forms with the RoC.


Yes, restrictions may include compliance with succession laws, obtaining necessary approvals from the board and RoC, and ensuring compliance with the Articles of Association (AOA) of the company.


Yes, restrictions may include compliance with succession laws, obtaining necessary approvals from the board and RoC, and ensuring compliance with the Articles of Association (AOA) of the company.


Failure to inform the company can lead to delays in updating the share register and potential complications in exercising ownership rights.



What documents are required for shares transmission in a private limited company?




Documents such as legal heirship certificate, board resolution, share transmission deed, Form SH-4, and necessary forms for filing with the RoC are required.


The process must be completed within a specified timeline, as per the requirements of succession laws, board resolutions, and any applicable regulations.


Non-compliance may lead to legal disputes, rejection of transmission by regulatory authorities, penalties imposed by the RoC, and adverse impact on the company’s compliance status and reputation.


Yes, Avenue Advisory provides expert assistance for shares transmission, including obtaining legal heirship certificate, drafting of resolutions, preparation of documents, filing with the RoC, and compliance monitoring.


Avenue Advisory ensures compliance with the shares transmission procedure by guiding clients through the process, assisting in obtaining necessary certificates, preparing accurate documents, and liaising with the RoC for timely approvals.


Absolutely! CAA offers comprehensive support for shares transmission, including:

* Assessing your specific case and advising on legal requirements.
* Gathering and verifying necessary documents.
* Completing and submitting forms to the company.
* Liaising with the company on your behalf throughout the process.

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