Difference Between Transfer and Transmission of Shares
There are two primary methods for acquiring shares of a corporation when it comes to ownership: transfer and transmission. Despite their apparent similarity, these phrases actually refer to two different processes. We shall examine the distinctions between share transfer and share transmission in this blog.
How do Shares Work?
It’s critical to comprehend what a share is before delving further into the distinctions between transfer and transmission of shares. An ownership stake in a corporation is represented by a share. People who own shares are entitled to a share of the company’s profits as well as ownership of a portion of the business.
What Exactly is Share Transfer?
The act of willingly transferring ownership of shares from one person to another is referred to as a transfer of shares.. This can happen through a sale or gift of shares, for example. The transferor and the transferee both must sign the share transfer form, and the transfer is complete when the company’s registrar updates its records to reflect the new ownership.
Share ownership is transferred when one person gives their shares to another. This is referred to as a share transfer. This could occur for a number of reasons, such as when a shareholder wishes to sell their shares or when a business has to issue new shares to raise money.
Transmission of shares, on the other hand, refers to the transfer of shares that happens automatically when the shareholder dies or is declared bankrupt. In this case, the ownership of the shares is transferred to the legal heirs or representatives of the deceased or bankrupt shareholder. The legal heirs or representatives need to provide relevant documents, such as a death certificate or court order, to prove their entitlement to the shares.
What is Transmission of Share?
The act of transferring ownership of shares from one person to another without a sale or purchase is referred to as transmission of shares. This may occur if a shareholder dies or becomes unable.
Shares of a deceased shareholder are given to their beneficiaries or heirs. Usually, the shareholder’s estate executor is in charge of this procedure. The shares will be allocated in accordance with the intestacy rules of the country where the firm was established if the shareholder did not leave a will.
Either the buyer or the seller may start the transfer of shares. A stock transfer form must be filled out and signed by the seller in the presence of a witness. The buyer is then given this paperwork, and they both have to sign it in front of a witness. After the transfer is finished, the buyer takes ownership of the shares.
A shareholder’s shares may also be transferred if they become unable owing to a physical or mental impairment. In this scenario, managing the shares will be possible on behalf of the shareholder by the shareholder’s legal representative, such as a guardian or power of attorney.
Differences Between Transfer and Transmission of Shares
The circumstances under which they take place are the key distinction between a share transfer and a share transmission. When a shareholder sells their shares freely to another individual, there has been a transfer of shares. As opposed to this, transmission of shares happens when ownership of shares is transferred without a sale or purchase, as when a shareholder dies or is rendered unable.
The method involved in a share transfer or transmission is another distinction. When transferring shares, the seller is required to fill out a stock transfer form and sign it in front of a witness. The buyer must also sign the document before a witness as well. After the transfer is finished, the buyer takes ownership of the shares.
The process is more difficult when shares are being transmitted. Shares of a deceased shareholder are given to their beneficiaries or heirs. Usually, the shareholder’s estate executor is in charge of this procedure. The shares will be allocated in accordance with the intestacy rules of the country where the firm was established if the shareholder did not leave a will. If there are many heirs or beneficiaries, this procedure may take a while and be complicated.
Conclusion
In a nutshell despite their apparent similarity, the terms “transfer” and “transmission” of shares actually relate to two different procedures. Transmitting shares happens when ownership of shares is transferred without a sale or purchase, such as when a shareholder dies or becomes incapable of managing their affairs. Transferring shares occurs when a shareholder freely sells their shares to another person. Both the transfer and transmission of shares are subject to tax consequences. Transferring shares may subject the seller to capital gains tax on any proceeds realised from the sale. On the other hand, if shares are transferred, there can be inheritance tax repercussions depending on their value and the country where the company is formed.
How to Transfer Physical Shares to Demat Account
