# Transmission of Shares

## Meaning

Transmission of shares = transfer of title to shares by operation of law, not by act of parties.

It occurs when a registered shareholder:

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

## Consequences of Transmission

### On Death

Shares vest in the legal representative (LR).
The deceased's estate remains liable for any unpaid amount.
LR may sell the shares without himself being registered (subject to AOA).
LR is entitled to be entered on the register of members if he so desires.

### On Insolvency

Shares vest in the Official Assignee / Receiver.
Receiver may get registered as holder or dispose of the shares.
Receiver may disclaim partly-paid shares OR fully-paid shares subject to mortgage/encumbrance.

### On Lunacy

Shares are transmitted to administrator appointed by Court.

## Procedure for Transmission

No instrument of transfer is required since the original owner is incapable of executing one. No consideration is involved. No stamp duty is payable.

### Documents Generally 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 (where there are multiple claimants)

## Refusal & Appeal

Same procedure as transfer of shares (Section 58 timelines apply).

## Transfer vs Transmission — Comparison Table

Basis	Transfer	Transmission
Nature	Voluntary act of member	By operation of law
Consideration	Always present	Not involved
Stamp duty	Required	Not required
Instrument	Valid instrument of transfer required	No instrument required
Triggering event	Member wishes to sell	Death, bankruptcy, lunacy
Parties	Living persons / corporate bodies	LR / Receiver / Administrator

## Sub-section (5) — Transfer by Legal Representative

A transfer of any security (or other interest in the company) made by the legal representative of a deceased person shall be valid as if the LR is the holder at the time of execution — even though he is not registered as a member.

Worked example

### Example 1

Example 1 — Death of Shareholder:

Mr. X, holding 10,000 shares in ABC Ltd, dies leaving a will appointing his son Y as executor. What is the procedure?

Answer: Y must apply for transmission with: (a) application, (b) letter of indemnity, (c) probate of will. Y can sell shares without being registered OR get registered as member. No stamp duty.

### Example 2

Example 2 — Insolvency:

Mr. P, holding 1,000 partly-paid shares in QR Ltd, is adjudicated insolvent.

Answer: Shares vest in the Official Assignee, who may register as holder, sell them, or disclaim them (since they are partly paid).

### Example 3

Example 3 — Transfer by LR:

Mr. A dies. His LR Mr. B (not yet registered as member) transfers the shares to Mr. C.

Answer: Under Section 56(5), this transfer is valid as if B is the holder at the time of execution — even without prior registration as member.

### Example 4

Example 4 — Stamp Duty Question:

Is stamp duty required for transmission?

Answer: No. Since there is no consideration and no formal instrument, no stamp duty applies.

⚠️ Common exam mistakes

Requiring an instrument of transfer for transmission — none is needed.
Charging stamp duty on transmission — not applicable.
Believing that the LR must first become a member before he can transfer — Section 56(5) explicitly validates LR transfers.
Confusing 'transfer' (voluntary) with 'transmission' (operation of law).
Forgetting that insolvency transmits shares to the Official Assignee, not directly to creditors.

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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