In the world of business and investments, shares represent ownership in a company. Whether you're an investor, a legal heir, or a business owner, there may come a time when you need to transfer or inherit shares. But how does this actually work? And what does the Company Law say about it?

Let’s break it down in simple terms.

What Are Shares?

Shares are like pieces of a company. If you own shares in a company, it means you own a part of it. You may get profits (called dividends), and in some cases, you can vote on company matters. These shares can be bought, sold, gifted, or passed on after someone’s death.

Transfer and Transmission of Shares in Company Law

When shares change hands, it usually happens in two ways:

1. Transfer of Shares
2. Transmission of Shares

These terms might sound similar, but they are quite different under Company Law. Let’s explore what each means.

1. Transfer of Shares

A transfer of shares is a voluntary act. It means one person decides to give or sell their shares to another person. This is common when someone wants to:

• Sell their shares to another investor
• Gift shares to a friend or family member
• Exit a business and transfer ownership

In private limited companies, Transmission of shares share in company law is  often need approval from other shareholders or the board of directors. In public companies, shares are freely transferable, which means you can usually sell them without much restriction.

How Transfer Works:

• A share transfer form (also called Form SH-4 in India) must be filled and signed.
• Share certificates must be handed over.
• The company updates its records and issues a new share certificate in the name of the buyer.

So, in short, a transfer of shares is done while both the buyer and seller are alive and agree to the transaction.

2. Transmission of Shares

A transmission of shares happens when the shareholder dies, becomes insolvent, or is mentally incapable of managing their property. In this case, shares are passed on automatically to the legal heir or representative.

Unlike a transfer, transmission of shares is not voluntary—it happens by law.

When Transmission Happens:

• On the death of a shareholder, shares pass to the nominee or legal heir.
• If the shareholder becomes insolvent, an official receiver may take control.
• If the shareholder is mentally unfit, a guardian may be appointed to manage the shares.

Documents Needed for Transmission:

• Death certificate (in case of death)
• Succession certificate, will, or probate
• Identity proof of the legal heir
• Request letter to the company

The company then verifies the documents and transfers the shares to the rightful person.

Key Differences Between Transfer and Transmission of Shares

Why This Matters

Understanding the transfer and transmission of shares in company law is important for anyone involved in a company—whether you're a shareholder, director, or heir.

If you’re selling or gifting shares, it’s important to follow the correct process to ensure the new owner is legally recognized. If you’re inheriting shares, you should know what documents are needed and how to claim them.

Failure to follow the right steps can lead to delays, disputes, or even legal trouble.

Conclusion

The transfer of shares and transmission of shares may seem like technical terms, but they play a big role in how businesses and family wealth are managed. Transmission of shares in company law ensures that shares are passed on fairly when someone can no longer hold them, while transfer of shares allows people to change ownership when they choose to.

By understanding the basics, you can handle share-related matters smoothly and with confidence. Foe more click the below link:

https://investorlink.in/transmission-of-shares