Understand the difference between transfer and transmission of shares under Indian company law. Learn the process, documents required, stamp duty rules, and when each one applies.
RK Gupta, Practising Company Secretary · 15+ years experience
A side-by-side comparison covering every important dimension of transfer and transmission of shares in company law.
| Parameter | Transfer of Shares | Transmission of Shares |
|---|---|---|
| Definition | Voluntary transfer of share ownership from one person to another through a deliberate act such as sale, gift, or exchange. | Automatic passing of share ownership by operation of law due to events like death, insolvency, or mental incapacity of the shareholder. |
| Nature | Voluntary act — initiated by the shareholder's own decision. | Involuntary — happens automatically due to circumstances beyond the shareholder's control. |
| Cause / Trigger | Sale, purchase, gift, exchange, or any agreement between parties. | Death of shareholder, bankruptcy/insolvency, lunacy, or court order. |
| Parties Involved | Two parties: Transferor (seller/giver) and Transferee (buyer/recipient). | The deceased's legal heirs, nominee, official assignee, or court-appointed guardian. |
| Instrument Required | Transfer Deed (Form SH-4) duly executed and stamped. | Death certificate, succession certificate, probate, legal heir certificate, or insolvency order. |
| Consideration | Usually involves payment (consideration), except in case of gift. | No consideration — shares pass without any payment. |
| Stamp Duty | Yes — 0.25% of the share value on the transfer deed. | No stamp duty required. |
| Legal Basis | Sections 56 and 58 of the Companies Act, 2013. | Section 56 read with Articles of Association; operation of law. |
| Board Approval | May be required (especially in private companies). Board can refuse registration. | Board cannot refuse if valid documents are submitted. |
| Liability | Transferee's liability begins from the date of registration of transfer. | Legal heir/claimant's liability relates back to the date of death or triggering event. |
Transfer of shares refers to the voluntary act of changing the ownership of shares from one person (the transferor) to another person (the transferee). It is a deliberate transaction, typically arising from a sale, purchase, gift, or exchange of shares between two parties who mutually agree on the terms.
Under Indian company law, the process of transfer of shares is governed by Section 56 of the Companies Act, 2013. For physical shares, the transferor must execute a proper instrument of transfer — known as Form SH-4 — which serves as the transfer deed. This deed must be duly signed by both the transferor and the transferee and must be stamped with the appropriate stamp duty.
Key Point: For listed companies, most shares are now held in demat form and transfer happens electronically through CDSL or NSDL. The physical transfer process (using Form SH-4) applies primarily to physical share certificates of unlisted or older companies.
A valid share transfer has certain characteristics that distinguish it from transmission. The transfer is always a bilateral act — it requires the consent and participation of both parties. There must be a valid consideration (except in the case of a gift), and a proper instrument of transfer must be executed. The transfer is complete only when the company registers the new owner in its Register of Members.
In private companies, the Articles of Association typically impose restrictions on the transfer of shares, such as requiring board approval or offering existing shareholders the right of first refusal. These restrictions are a defining feature of private companies under Section 2(68) of the Companies Act, 2013.
Transmission of shares meaning: Transmission refers to the transfer of title of shares by operation of law, without any voluntary act by the shareholder. Unlike transfer, it is not a deliberate transaction — it is triggered by events such as the death of the shareholder, their insolvency, or their mental incapacity.
When a shareholder passes away, their shares do not simply disappear. The ownership automatically vests in the legal heirs, nominee, or the executor of the will. The process of recording this change with the company is what we call transmission of shares. Similarly, when a shareholder is declared insolvent, the shares may vest in the official assignee or receiver.
Important: Transmission does not require a transfer deed (Form SH-4), and no stamp duty is payable. The company cannot refuse transmission if the claimant submits all valid supporting documents as prescribed by law.
If the deceased shareholder had registered a nomination under Section 72 of the Companies Act, the process becomes significantly simpler. The nominee can directly apply for transmission by submitting the death certificate, their KYC documents, and the original share certificates. Without a nomination, the legal heirs must obtain a succession certificate, probate of will, or legal heir certificate from the court — which adds time and complexity to the process.
This is why we always advise investors to register nominations for all their share holdings, whether held in physical or demat form. A simple nomination can save your family months of paperwork and legal proceedings.
While the comparison table above provides a quick snapshot, let us explore the difference between transfer and transmission of shares in greater depth across the most important dimensions.
The most fundamental difference lies in the nature of the act. Transfer is always a voluntary, deliberate act — the shareholder consciously decides to part with their shares. They negotiate the terms, sign the transfer deed, and hand over the share certificates willingly. Transmission, on the other hand, is entirely involuntary. It happens due to circumstances beyond anyone's control — death, insolvency, or incapacity. No negotiation takes place, and no transfer deed is executed.
For transfer, the primary document is the Share Transfer Deed (Form SH-4), which must be properly stamped and signed by both parties. For transmission, the documents are evidence-based — the claimant must prove their right to the shares through a death certificate, succession certificate, probate of will, legal heir certificate, or an insolvency order. The documentation for transmission is often more extensive because the claimant must establish their legal entitlement.
This is a practical difference that affects cost. Share transfer attracts stamp duty at 0.25% of the consideration or market value. No stamp duty is payable on transmission because there is no sale or exchange — the shares pass by operation of law. This distinction can be financially significant when dealing with large share holdings.
A company (particularly a private company) has the right to refuse registration of a transfer under Section 58, subject to the restrictions in its Articles of Association. However, a company cannot refuse transmission of shares if the claimant has submitted all the required legal documents. Transmission is a right that flows from the law itself, not from the company's discretion.
Practical Tip: If you are dealing with old physical share certificates — whether for transfer or transmission — consider getting them dematerialised first. SEBI has mandated that all transfer requests for listed company shares must be processed only in demat form. Transmission, however, can still be done in physical form.
The complete shares transfer procedure for physical shares under Indian company law.
How to get shares transmitted to the legal heir or nominee after the death of a shareholder.
Need help navigating the transmission process? Our team handles all documentation, RTA coordination, and follow-ups. Get expert assistance on WhatsApp.
See how transfer and transmission of shares apply in everyday situations.
After getting shares transmitted in your name, you decide to sell them on the stock exchange or to a private buyer. This subsequent sale is a transfer — voluntary, with consideration and stamp duty.
A father held 500 shares of a company and registered his son as nominee. After the father's death, the son applies for transmission with the death certificate and KYC — no transfer deed or stamp duty needed.
A mother wants to gift her shares to her daughter. Even though no money changes hands, this is a transfer. A transfer deed (Form SH-4) must be executed, and stamp duty must be paid on the market value.
A shareholder is declared insolvent by a court. Their shares automatically vest in the official assignee or liquidator by operation of law. The company records this change through transmission, not transfer.
A promoter of a private company sells 25% shares to a new investor. The Board approves the transfer as per the Articles. Both parties execute Form SH-4, pay stamp duty, and the company issues a new certificate.
A shareholder dies intestate (without a will) and without nomination. Multiple legal heirs must obtain a succession certificate from the court, provide NOCs, and jointly apply for transmission. This process can take several months.
Answers to the most common questions about share transfer, transmission, and the process under Indian company law.
Whether you're dealing with a share sale, inheritance claim, or complex transmission case — our CS-guided team handles the entire process for you. Document preparation, RTA coordination, and follow-ups included.
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