Transmission of shares

3 key takeaways

• Transmission of shares occurs when the ownership of shares is transferred to legal heirs or representatives due to the death or incapacity of the original shareholder.
• This process is governed by the company’s articles of association and relevant legal provisions, ensuring the proper and legal transfer of ownership.
• Documentation such as a death certificate, probate, or letters of administration is typically required to facilitate the transmission of shares.

What is the transmission of shares?

The transmission of shares is the involuntary transfer of ownership of shares due to the death, bankruptcy, or incapacity of a shareholder. Unlike a transfer of shares, which involves a deliberate action by the shareholder, transmission is triggered by legal or natural circumstances. The new owner of the shares is typically determined by the will of the deceased shareholder, the laws of intestacy, or court orders.

Process of transmission of shares

The process of transmitting shares involves several steps:

• Notification: The legal heirs or representatives of the deceased shareholder must notify the company about the shareholder’s death or incapacity. This notification typically includes providing the death certificate or legal documentation of incapacity.
• Verification: The company verifies the authenticity of the documents provided. This may involve checking the death certificate, probate, letters of administration, or any court orders.
• Documentation: The heirs or representatives must submit additional documentation as required by the company’s articles of association and relevant laws. This may include probate (if there is a will), letters of administration (if there is no will), and an indemnity bond.
• Company approval: The company’s board of directors reviews the documents and, upon satisfaction, approves the transmission of shares to the legal heirs or representatives.
• Updating the register: Once approved, the company updates its register of members to reflect the new ownership of the shares.
• Issuance of new share certificate: The company issues a new share certificate in the name of the new shareholder(s).

Legal considerations

The transmission of shares is subject to various legal considerations:

• Articles of association: The company’s articles of association may have specific provisions regarding the transmission of shares, which must be followed.
• Probate and succession laws: The transmission process is governed by probate and succession laws, which vary by jurisdiction and determine the legal heirs or representatives.
• Court orders: In cases of dispute or absence of a will, court orders may be required to determine the rightful heirs and facilitate the transmission of shares.

Documentation required for transmission of shares

The documentation required for the transmission of shares typically includes:

• Death certificate: A certified copy of the death certificate of the deceased shareholder.
• Probate or letters of administration: Legal documentation proving the authority of the heirs or representatives to manage the deceased’s estate.
• Indemnity bond: An indemnity bond may be required to protect the company against any future claims related to the transmission.
• Share certificates: The original share certificates held by the deceased shareholder.

Differences between transfer and transmission of shares

There are key differences between the transfer and transmission of shares:

• Initiation: Transfer of shares is initiated by the shareholder voluntarily, while transmission is initiated due to the death or incapacity of the shareholder.
• Documentation: Transfer requires a transfer deed and consideration, whereas transmission requires legal documentation such as probate and a death certificate.
• Approval: Transfer of shares often requires approval from the company and payment of transfer fees, while transmission involves legal verification and no consideration.

Example of transmission of shares

Consider a shareholder who holds shares in a company and passes away. The legal heirs of the deceased must notify the company and provide the required documents, such as the death certificate and probate. The company verifies the documents, and upon approval, updates its register of members to reflect the new ownership and issues a new share certificate to the legal heirs.

Understanding the transmission of shares is essential for shareholders, legal representatives, and company officials to ensure the proper and legal transfer of ownership. For further exploration, topics such as corporate governance, succession planning, and securities law provide deeper insights into the procedures and implications of the transmission of shares.