# Transmission of Shares

## Meaning

Transmission of shares takes place by operation of law when a registered shareholder:

Dies, or
Becomes lunatic, or
Is adjudicated insolvent, or
(If a company) goes into liquidation.

## Devolution in Different Scenarios

Event	Devolution To
Death / Lunacy	Legal representative; estate remains liable for unpaid amount; representative may sell without being registered (subject to Articles) or be entered in register of members
Insolvency	Official Assignee / Receiver — may register as holder or dispose; may disclaim partly-paid or encumbered fully-paid shares

## Key Features

No formal instrument of transfer required (owner cannot execute as transferor).
No consideration involved.
No stamp duty required for registration of transmission.

## Procedure for Transmission

Follows the procedure laid down in the Articles. Generally, documents required:

1. Application for transmission of shares;

2. Letter of indemnity;

3. Probate (attested copy of will) OR letter of administration;

4. No-objection certificate (if more than one claimant).

## Refusal of Registration of Transmission

Same procedure as for refusal of transfer under Section 58 applies.

## Transfer vs. Transmission — Critical Distinction

Basis	Transfer	Transmission
Nature	Voluntary act of member	By operation of law
Consideration	Always involves consideration	No consideration; no stamp duty
Triggering event	Member intends to sell	Death, bankruptcy, lunacy of member
Instrument	Valid instrument of transfer required	No instrument possible/required

## Transfer by Legal Representative of Deceased [Section 56(5)]

Transfer of any security by the legal representative of a deceased person shall be valid as if such legal representative is the holder at the time of transfer — even though he himself was not registered as a member.

## Examples of Transmission Events (Illustrative)

1. Death → shares transmitted to legal representative.

2. Insolvency → shares transmitted to Official Receiver.

3. Lunacy → shares transmitted to administrator appointed by Court.

Worked example

### Example 1

Example 1 — Death of Shareholder: Mr. X, holding 1,000 shares in ABC Ltd., dies leaving a will. His son Mr. Y, named in the probate, applies with the probate, letter of indemnity, and transmission application. The company registers the transmission WITHOUT any instrument of transfer and WITHOUT any stamp duty.

### Example 2

Example 2 — Insolvent Shareholder: Mr. P, holding partly paid shares in XYZ Ltd., is adjudged insolvent. The shares vest in the Official Assignee, who may either register himself or DISCLAIM the partly-paid shares to avoid the liability.

### Example 3

Example 3 — Legal Rep Sells without Registration: Mrs. R (legal heir of deceased Mr. R) sells her late husband's shares to Mr. S without first registering herself as member. The transfer is VALID under Section 56(5) as if Mrs. R were the registered holder.

### Example 4

Example 4 — Distinction: Mr. A sells shares to Mr. B for ₹1,00,000 → TRANSFER (voluntary, consideration, instrument needed). Mr. A dies and shares pass to son C → TRANSMISSION (operation of law, no consideration, no instrument).

⚠️ Common exam mistakes

Treating transmission as requiring an instrument of transfer — it does NOT.
Charging stamp duty on transmission — none is required.
Forgetting that the legal representative can SELL shares without being registered first.
Confusing 'transfer' (voluntary, inter vivos) with 'transmission' (operation of law).
Missing that insolvency vests shares in Official Assignee — not the family.
Believing transmission only happens on death — lunacy, insolvency, and liquidation also trigger it.

Bare-Act text Section 56(5) · Companies Act, 2013 · click to expand

Section 56(5) — The transfer of any security or other interest of a deceased person in a company made by his legal representative shall, although the legal representative is not the holder thereof, be valid as if he had been the holder at the time of the execution of the instrument of transfer.

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Transmission of Shares — Concept, Procedure & Distinction from Transfer

Worked example

⚠️ Common exam mistakes