All you need to know about the Transfer and Transmission of Shares

Stakeholders, including executives and sometimes employees, can own shares in a company. Sometimes, they receive shares as part of a reward program, while they purchase them other times. Shares hold more value than anything else since it gives a sense of ownership. Let’s say a company purchases 100 shares from the market. It has six shareholders. Five received 16 shares each, but the sixth person became eligible for 20 shares.

So, considering the shares and divided policies 101, we can say that the shareholder with 20% ownership of the company has more rights than others. Shares are a type of asset that one can liquify, foreclose on, prematurely invest in, and perform several other functions. Once a person decides to leave the company or resigns from the shareholder post, they sell the shares under their name. If someone sells 20 shares, the equivalent number of shares will be added to the liquidity pool. It will not have any ownership, meaning another person can purchase it with ease.

When can one not sell the shares voluntarily?

There are certain conditions where a person cannot sell shares. For instance, if they sign a contract while purchasing the shares, they may not be eligible to sell the shares. If they sell them, they may face legal consequences. Another situation where you cannot sell the shares is for sole ownership. If you own 100% of the shares listed under your company, you cannot sell the shares.

If you do so, you will effectively sell the company itself, especially if your investments are in the form of those shares. So, try to sell stocks or portions of shares if you require funds. You will still have ownership only if you hold the maximum number of shares under your name.

Is transfer or transmission of shares similar to selling?

Often, people think that the transfer and transmission of shares are similar to selling them. But that is not the truth. A transfer of shares happens when you transfer the ownership from your title to another. You will do so willingly, like to someone close to you or another family member. There will be no concept of purchasing or selling the shares. Therefore, the liquidity pool does not receive shares during transfer.

Transmission of shares, on the other hand, happens under company laws. This statement implies that the shares under one name will be transferred to another involuntarily. No one can control the title change of the shares. In addition, a few laws will govern the entire process, ensuring no one can claim the shares illegally. For instance, if someone dies, the transmission of shares takes place automatically to the nominee.

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