All you need to know about the Transfer and Transmission of Shares

All you need to know about the Transfer and Transmission of Shares

Stakeholders, including executives and sometimes employees, can own shares in a company. Sometimes, they receive shares as part of a reward program, while they purchase them other times. Shares hold more value than anything else since it gives a sense of ownership. Let’s say a company purchases 100 shares from the market. It has six shareholders. Five received 16 shares each, but the sixth person became eligible for 20 shares.

So, considering the shares and divided policies 101, we can say that the shareholder with 20% ownership of the company has more rights than others. Shares are a type of asset that one can liquify, foreclose on, prematurely invest in, and perform several other functions. Once a person decides to leave the company or resigns from the shareholder post, they sell the shares under their name. If someone sells 20 shares, the equivalent number of shares will be added to the liquidity pool. It will not have any ownership, meaning another person can purchase it with ease.

Read More: How to Claim Unverified Dividends and Shares After Being Transferred to IEPF

When can one not sell the shares voluntarily?

There are certain conditions where a person cannot sell shares. For instance, if they sign a contract while purchasing the shares, they may not be eligible to sell the shares. If they sell them, they may face legal consequences. Another situation where you cannot sell the shares is for sole ownership. If you own 100% of the shares listed under your company, you cannot sell the shares.

If you do so, you will effectively sell the company itself, especially if your investments are in the form of those shares. So, try to sell stocks or portions of shares if you require funds. You will still have ownership only if you hold the maximum number of shares under your name.

Is transfer or transmission of shares similar to selling?

Often, people think that the transfer and transmission of shares are similar to selling them. But that is not the truth. A transfer of shares happens when you transfer the ownership from your title to another. You will do so willingly, like to someone close to you or another family member. There will be no concept of purchasing or selling the shares. Therefore, the liquidity pool does not receive shares during transfer.

Transmission of shares, on the other hand, happens under company laws. This statement implies that the shares under one name will be transferred to another involuntarily. No one can control the title change of the shares. In addition, a few laws will govern the entire process, ensuring no one can claim the shares illegally. For instance, if someone dies, the transmission of shares takes place automatically to the nominee.

What are the challenges in the transfer of shares?

During the transfer of shares, there are certain challenges one can face. The following section describes these hurdles and their causes.

1. Mismatch of signatures
The signatures of the original share ownership document and the transfer of title deed must match. If there is a mismatch in the signatures, the transfer process will stop then and there. That’s why one needs to be sure about the signatures before submitting the transfer deed.

2. Loss of original share ownership certificate
Everyone needs to submit the share ownership certificate. The document implies the person in charge of the shares, the initial number of shares bought, and so many other details. If this document is not available, one cannot proceed further with the transfer process.

3. No submission of the share transfer deed
If someone fails to submit the share transfer deed or the information is not right, there will be no change in the share title. The regulatory body can disapprove the entire application on the basis of improper or incomplete documentation.

4. Manipulated share certificated
Most of the time, the share certificates submitted might not match the digital copies of the same. It usually happens when someone manipulates the information knowingly. In this case, there won’t be any transfer of shares from one person to another.

What are the challenges in the transmission of shares?

Just like the challenges in the transfer of shares, one can also encounter hurdles in the transmission of shares. Without addressing these problems, it will become difficult to complete the title transmission process. In addition, one can release the shares in the liquidity pool due to the absence of any nominee for the transmission.

1. Presence of multiple share ownerships
If someone has multiple shareholdings in different enterprises and companies, the regulating bodies will not allow the transmission of ownership. This is because different companies might have different rules and regulations for share transmission. Also, the original share certificates for some shareholdings might not have nominee names. In such situations, the regulatory bodies cannot allow the transmission of shares.

2. Not following the conditions for share transmission
There are certain conditions guarding the process of share transmission. Failure to meet the conditions or follow the rules can disrupt the process. In this case, you can take legal advice to understand the terms and conditions further. The professionals can also help you proceed with the transmission of shares.

3. The document doesn’t have a nominee
If the original share certificate document doesn’t have a proper nominee, the transmission of shares will halt. In this case, documents like birth certificates, proof of heirship, and others will help you restart the share transmission.

Conclusion

This article illustrates the transfer and transmission of shares, along with the challenges. The best way to save yourself from these hurdles is through an association with a legal firm. The professionals can help you a lot as they know corporate and share market laws.

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