By mishrashivangi.in@gmail.com 
In the world of finance and investments, two terms often get mixed up: transfer and transmission of securities. While they may sound alike, they refer to completely different processes. If you’re a shareholder or planning to invest, understanding the distinction between these terms is key. Let’s break it down in simple terms.
What is a Transfer of Securities?
A transfer of securities is a voluntary act where ownership is moved from one person to another. This is something the current shareholder chooses to do. It could be for various reasons—maybe they want to sell the shares, gift them to someone, or exchange them for something else.
You can think of it like selling your car: you voluntarily pass the ownership to a buyer, and the car now belongs to them. When it comes to shares or other securities, this usually happens in the open market or privately between two parties.
Here’s what to know about Transfers:
- It’s a Choice: The shareholder voluntarily decides to transfer their shares to another person.
- Paperwork Involved: A share transfer form (or deed) is needed, and it needs to be signed by both the person giving the shares (transferor) and the person receiving them (transferee).
- Approval from the Company: Usually, the transfer needs to be approved by the company’s board of directors.
- Taxes May Apply: If you’re selling shares and making a profit, taxes (like capital gains tax) may kick in.
What is a Transmission of Securities?
In contrast, transmission of securities happens automatically when the original owner can no longer hold them—usually due to legal reasons such as death, insolvency, or bankruptcy. Unlike a transfer, transmission isn’t voluntary. The shares pass on to legal heirs or an official representative by law.
Key Points about Transmission:
- Happens Automatically by Law: Transmission occurs because of legal reasons, like the shareholder passing away or becoming bankrupt.
- No Need for a Transfer Deed: Since it’s not a voluntary act, you don’t need a transfer form. However, legal documents like a death certificate or probate will be required.
- No Taxes on Transmission: Since there’s no sale or profit involved, you won’t have to worry about paying capital gains tax.
- Passed to Heirs: The shares go to the rightful heirs or legal representatives, depending on the situation.
Transfer vs. Transmission: What’s the Difference?
| Aspect | Transfer | Transmission |
| Nature | Voluntary (based on the owner’s choice) | Involuntary (due to death, bankruptcy, etc.) |
| Who Starts It | Shareholder or owner | Legal situation (like death or insolvency) |
| Process | Requires paperwork, including a transfer deed | Requires legal documents (death certificate, probate) |
| Company Approval | Often needs approval from the company’s board | Needs legal documents submitted to the company |
| Taxes | Taxes may apply if there’s a sale or profit involved | No taxes as no sale or profit is involved |
| Examples | Selling shares to someone else | Shares passed to heirs after a shareholder’s death |
Why It Matters
Understanding the difference between transfer and transmission is essential for anyone dealing with investments. While a transfer gives shareholders flexibility in managing their portfolios, transmission ensures that their assets are smoothly handed over in case of unforeseen events like death.In short, a transfer is a voluntary decision by the shareholder, while transmission happens automatically due to legal reasons. Knowing the difference can help you better plan for the future and avoid potential legal or tax issues