Distinguish between Transfer and Transmission of Shares?

Transfer and Transmission of Shares:

1. Transfer of Shares:

• Definition: Transfer of shares refers to the voluntary transfer of shares from one person (transferor) to another (transferee) by way of sale, gift, or exchange.
• Initiation: The transfer of shares is initiated by the shareholder who wishes to sell or transfer their shares. The transferor must execute a proper instrument of transfer, usually in the form prescribed by the company.
• Consent: The transfer of shares requires the consent of both parties – the transferor and the transferee. The company is not involved in the transfer process but may need to approve the transfer based on its articles of association.
• Effect: Once the transfer is completed and the company registers the transfer, the transferee becomes the legal owner of the shares and assumes all rights and liabilities associated with share ownership.

2. Transmission of Shares:

• Definition: Transmission of shares refers to the transfer of shares from one person to another by operation of law, such as in the case of the death, bankruptcy, or insolvency of a shareholder.
• Initiation: The transmission of shares is not voluntary and occurs automatically upon the happening of a certain event, such as the death of a shareholder.
• Consent: Unlike the transfer of shares, the transmission of shares does not require the consent of the parties involved. It occurs as a matter of legal right.
• Effect: The effect of transmission is that the legal heirs, representatives, or trustees of the deceased or bankrupt shareholder become entitled to the shares. The company must be notified of the transmission, and the new shareholder's name must be registered in the company's books.

Key Differences:

1. Voluntary vs. Involuntary: Transfer of shares is voluntary and initiated by the shareholder, while transmission of shares is involuntary and occurs by operation of law.
2. Consent: Transfer of shares requires the consent of both parties, while transmission does not require consent.
3. Initiation: Transfer of shares is initiated by the shareholder, while transmission is initiated by external events such as death or insolvency.

In conclusion, while transfer and transmission of shares both involve the change of ownership of shares, they differ in terms of initiation, consent, and voluntariness. Understanding these differences is important for shareholders and companies alike to ensure compliance with legal and regulatory requirements.