Transfer and transmission of securities in general terms means movement. When an asset moves or movement of asset is known as transfer. Transfer is of two types it can be a physical movement or a movement of ownership. With respect to securities, movement is again of two types one is voluntary and the other one is operational by law. Movement regarding securities can be possible in two ways, which are the transfer and transmission of securities. When there is a voluntary act by which securities are transferred through the contract, then this will be known as a transfer of securities. On the other hand after the death of the holder of securities or when the holder of securities becomes insolvent or lunatic then by the way of operation of law shares will be transferred and this is known as the transmission of shares.
Meaning of Securities
As per section 2(h) of the Securities Contracts (Regulation) Act, 1956, “securities” include but are not limited to shares, stocks, bonds, debentures, debenture stock, or other marketable securities of a like nature of any company that is incorporated or any other body corporate. Units or any other instrument issued by any collective investment scheme to the investors in such schemes and instruments issued to the investors under any mutual fund scheme will be considered as securities. Such other instruments as may be declared by the Central Government to be securities; and rights or interest in securities will also fall under the category of securities.
What is a Transfer of Securities?
Voluntary and intentional transfer of title and ownership of security from the transferor to the transferee is known as transfer of security. If the company is a public limited company its shares are easily transferable until and unless the company disallows such transfer with a valid reason however if the company is a private limited company then its securities are not transferable. But through a proper transfer deed transfer of a security of a private limited company can also be executed.
What is the Transmission of Securities?
If the owner of the security dies or becomes insolvent or lunatic then his securities need to be transferred through the operation of law and such transfer is known as the transmission of securities. Transmission is possible only if the transferee gives valid proof of entitlement to the securities. Without that proof transmission of securities is not possible. In case of death generally, shares have been transferred to the legal representative while in case of insolvency, securities are transferred to the official assignees. For the valid transmission of shares attachment of relevant documents is necessary. These documents include but are not limited to a certified copy of a death certificate, ID proof, succession certificate or probate of will or letter of Administration, specimen signature of a successor, etc.
Transfer and Transmission of Securities in India
Transfer and transmission of securities have been discussed under Chapter 4, Section 56 of the Companies Act, 2013. Some of the important points regarding the transfer and transmission of securities are given below in detail:
- If a company has no share capital, it cannot register a transfer of securities of the company or the interest of a member in the company
- Where the instrument of transfer has been lost or not been delivered within the time duration prescribed by law, the company may register the transfer as the Board may think fit.
- On receipt of an intimation of transmission of any right to securities company can register it.
- A transfer shall not be registered if the application is made by the transferor alone and it is related to partially paid shares. Registration is possible if the company gives a notice of the application to the transferee. And after the notice if the transferee gives no objection certificate to the transfer. All this has a time limit that is within two weeks from the receipt of the notice.
- All the companies shall deliver the certificates of all securities that have been allotted, transferred, or transmitted. But if it is prohibited to do so under some law or order of court it cannot deliver the certificates.
- Any transfer by a decedent’s legal representative of a security or other interest in a firm is valid as if the decedent had actually held the instrument of transfer.
Difference Between Transfer and Transmission of Securities
The difference between the transfer and transmission of securities lies in the circumstances, processes, and legal implications associated with both of them. Some common differences between both of them are given below:
| Particulars | Transfer of Securities | Transmission of Securities |
| Ownership | Voluntarily and intentional transfer of ownership | Ownership is transferred either to the legal representative or legal assignees |
| Reason of Transfer | Sale, gift, pledge, etc | Death, insolvency, and unsoundness |
| Legal Requirements | Agreement between parties, transfer deed, and verification of documents | Death certificate, succession certificate, or probate of a will will be required |
| Time Frame of Transfer | There is no such time limit it can be done at any time as per the law | It is possible only after the death of the security owner |
| Compliance | It is necessary to abide by the KYC requirements, the stamp duty, and the transfer restrictions. | It is necessary to comply with KYC regulations and get a succession certificate or will probate. |
| Consent | Consent of both the parties that are transferor and transferee is required | Consent of the transferee is needed as the other party is not able to give consent |
| Valuation | Not fixed, decided after the negotiation between both the parties | As per the market value |
| Tax Implications | Capital gain tax may be attracted | Not attract any such tax |
Conclusion
The difference between the transfer and transmission of securities is centered on their origin, procedure, and legal implications. Transfer involves voluntary ownership shift through agreements, while transmission occurs due to an investor’s death, requiring specific documentation for legal heirs. Transfers can happen anytime with various purposes, while transmissions are posthumous and don’t need the investor’s consent. Transfer and transmission of securities require compliance and might have tax implications, with transfers possibly incurring capital gains tax. Understanding these distinctions is vital for effective securities management.
