The term "Transmission of Shares" pertains to the transfer of ownership in shares due to the death, insolvency, or inheritance of a shareholder. In such cases, the procedure of transferring the ownership of shares is not a voluntary act like it would be in the case of transfer of shares. This article provides a detailed study of the transmission of shares under SEBI law.
Key Aspects of Transmission of Shares
The procedure for transmission of shares is mentioned in the company's Articles of Association. Typically, the legal heirs or nominees of the deceased shareholder need to submit several documents, including a death certificate, probate of will, or letters of administration, for the transmission of shares to take place.
Transmission vs Transfer of Shares
The process of transmission should not be confused with the transfer of shares. The latter involves a voluntary act of selling or gifting shares from one person to another, whereas the former occurs involuntarily upon the shareholder's death, insolvency, or other incidents of law.
Legal Framework of Transmission of Shares
The transmission of shares in India is regulated under the Companies Act 2013, the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and the rules specified in the company's Articles of Association.
Section 56(2) of the Companies Act 2013 dictates that a company shall register any transmission of securities or other interest of a deceased member of a company on the production of such evidence as may be required by the Board.
Further, Regulation 39(4)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandates that on receipt of proper documentation, the listed entity shall update its record and issue new certificates if required.
Procedure for Transmission of Shares
The procedure generally involves the following steps:
Submission of request: The legal heir or nominee of the deceased shareholder should submit a request for transmission of shares to the company.
Furnishing of documents: The legal heir or nominee must provide relevant documents, such as the death certificate, legal heir certificate, succession certificate, or probate of the will.
Verification of documents: The company verifies these documents. If the documents are in order, the company registers the transmission by updating its records.
Issue of new share certificates: Following the successful registration of transmission, the company issues new share certificates in the name of the heir or nominee.
Relevant Case Laws
Harshad Shantilal Mehta vs. SEBI: This is a landmark case where the Supreme Court allowed the transmission of shares to legal heirs. The court held that the shares owned by a deceased person are heritable and can be transmitted to the legal representatives.
SEBI vs. Shriram Mutual Fund: SEBI asserted its power to safeguard the interests of investors in securities and to promote the development of, and to regulate the securities market by facilitating transmission of units to the legal heirs.
Conclusion
In conclusion, the transmission of shares is a key facet of corporate governance under SEBI law in India. The seamless transmission of shares is crucial in maintaining the smooth operation of the securities market and ensuring the legal heirs' rights are safeguarded.
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