Share Transfer vs Share Transmission
Share transfer is the voluntary conveyance of shares from one person to another during the lifetime of both parties, while share transmission is the passing of ownership by operation of law upon the death, insolvency, or lunacy of the shareholder, requiring a different legal procedure.
Share transfer and share transmission are two distinct legal processes by which the ownership of shares in a company changes hands, and understanding the difference is important for investors, nominees, and legal heirs.
Share transfer is a deliberate, voluntary act by which a shareholder (transferor) sells or gifts their shares to another person (transferee) during their lifetime. In the demat system, shares are transferred electronically through NSDL or CDSL by submitting a Delivery Instruction Slip (DIS) or using the online demat instruction facility. Physical share transfers are now largely historical following SEBI's mandate that transfers of listed securities must be in demat form since April 2019. The transferor and transferee must both have demat accounts. Transfer is effected when the transferee's account is credited.
Share transmission, in contrast, occurs by operation of law — it is not a voluntary act. It happens upon the death of a shareholder, where the shares pass to the legal heirs or nominees, or upon the insolvency or lunacy of the shareholder. In the demat context, transmission is processed by the Depository Participant (DP) upon submission of required documents such as the death certificate, probate of will or succession certificate (depending on the situation), KYC documents of the claimant, and the transmission request form.
The distinction matters because transfer attracts stamp duty (though stamp duty on demat share transfers is minimal and often subsumed), while transmission does not attract stamp duty as it is not a conveyance by choice. Further, the procedures and documentary requirements differ significantly.
For investors, it is important to keep nominations updated in demat accounts. A nominee facilitates a smoother transmission process compared to legal heirs relying on succession certificates or probate, which can be time-consuming. SEBI has progressively strengthened nomination-related requirements in recent years to reduce the volume of unclaimed shares.