Introduction

In Malaysia, the Companies Act 2016 distinguishes between share transfer and transmission, each with legal significance concerning changes in ownership within companies.

Part 1: Distinction Between “Transfer” and “Transmission” of Shares:

A. Transfer of Shares:

• Transfer occurs when a shareholder voluntarily transfers the legal title of shares to another party.
• It involves a transferor (current owner) and a transferee (recipient), with a formal instrument of transfer required, typically executed on Forms of Transfer of Securities under Section 105 CA 2016.
• Restriction may apply, such as pre-emption rights or board discretion.

B. Transmission of Shares:

• Represents an automatic transfer of ownership, often involving legal heirs or nominees, triggered by events like death or bankruptcy.
• Section 109(1) CA 2016 outlines procedures for transmission in case of death or bankruptcy, including notification by the legal representative or Director General of Insolvency.
• Acceptable documents include probate of the will or letters of administration.

Part 2: Procedures for Transfer or Transmission of Shares:

2.1 Steps for the Transfer of Shares:

• Completion of Forms of Transfer of Securities.
• Lodgement of transfer form with the company.
• Registration of the transferee’s name within 30 days by the Company Secretary.
• Submission of original share certificate if issued, although not mandatory unless requested.

2.2 Steps for the Transmission of Shares:

• Submission of relevant documentation (e.g., death certificate) to the company.
• Approval by the company’s board of directors.
• Update of the company’s register of members.
• Transmission Processes:
• 1. Transmission by Nomination: If a shareholder nominated a recipient, the nominated individual may claim ownership by providing relevant documentation and nomination form.
• 2. Transmission by Succession: In the absence of nomination, shares may be transmitted to legal heirs according to succession laws, requiring a succession certificate or grant of probate.

Part 3: Case Law: Doctrine of Universal Succession

In United Renewable Energy Co Ltd v TS Solartech Sdn Bhd [2019] 8 CLJ 721, the Malaysian High Court clarified the distinction between transfer and transmission, recognizing universal succession as a form of transmission by operation of law. This concept was applied in the case where a merger resulted in one entity inheriting rights and obligations from the previous company, without the need for a traditional transfer process.

CONCLUSION

Understanding the difference between share transfer and transmission is crucial for shareholders and companies, as each process involves distinct legal procedures and implications.