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The Procedures for the Transfer and Transmission of Shares in BC | Stevens Law
When we say that the transfer of shares in both Private Limited Company and Limited Companies are voluntary, we mean that the transfer of ownership is free and can be done at the owner's digression. Of course, some other factors can cause an involuntary change in shares ownership; for instance, the death of a shareholder, etc.
Concept of Transfer and Transmission of Equity Shares
One thing to note is that transferring and transmitting shares are different. The former can be regarded as the process whereby a shareholder willingly transfers the shares in a company to another party, i.e., transferor to a transferee. On the other hand, the latter (transmission) refers to a situation whereby the ownership of a share is changed, determined, or reassigned by the law. Many factors can facilitate the transmission of shares by the Operation of Law. For example;
- The death of a member or a shareholder
- The transmission also happens when a member gets adjudicated Insolvent
- When the court of law orders it
- When a company has been amalgamated, the new company then issues new shares.
- When a company merges with another company, or it goes into liquidation, the Member of such company will also be affected
- When a member becomes mentally unstable or got terminally ill.
In essence, shares transfer involves two entities, while the court of law does the transmission of shares.
Types of Shares
Companies in BC can issue various kinds of shares, but out of all these types of shares, only two are common. They include preference share and Ordinary share.
Preference Shares: This type of share is one of the commonest in British Columbia because of its perks. This type of shareholder is entitled to a fixed dividend (fixed amount of money). Not only this, but preference shareholders also get paid before the ordinary shareholders. Lastly, preference shareholders often get paid a certain amount, according to a fixed percentage.
Ordinary Shares: This class is the direct opposite of preference shares. In that holders of this share are not entitled to a fixed dividend, they are not always a priority of the company, and they do not get paid before preference shareholders.
Who Can Transfer Shares?
A shareholder can be seen as someone or an entity holding at least one company share. Under the provision of the law, anybody can be a shareholder, including a minor. The only limitation of a minor being a shareholder is that they cannot enter a binding contract to sell or transfer their shares.
Also, anybody can sell or transfer the shares that they hold. And also, when it comes to transferring properties or shares, it can be in the form of a sale or gift. A shareholder may decide to sell his property or company shares at a given price. They can also decide to gift an entity their shares. However, whichever the shareholder decides on, they must follow the laid down rules and regulations of the company to which they own the shares.
As a shareholder, if you are willing to sell your shares, the best way to do that is to hire a proxy or an agent. This agent will enter a binding contract through a power of attorney to sell or transfer your shares to interested parties.
However, a company that an entity owns a share in may forbid one from transferring or selling their shares if they had already included the right of first offer clause in their Articles of Association. Suppose you or your attorney notice that you have this clause already in the contract before you sell or transfer to another party. In that case, you must inform them about their availability before informing other parties. If the company is interested, they will buy it; if they are not, they will allow you to sell it to other parties.
Basic Procedure for the Transmission and Transfer of Share
A shareholder may choose to sell part or their entire shareholding interest. The transferor or the transferee can initiate this transfer. If a shareholder wants to sell their entire shares in British Columbia, they will follow this process:
First, the law will require them to fill out a Share Transfer Form in favor of the new shareholder. Then after this, the form and share certificate must be submitted to the company they owe the share. After this, the company will issue a new certificate to the purchaser, whose name will now appear on the register of members of the company.
Transferring part shares will also take the same route. A shareholder will fill out a form (Share Transfer Form) acknowledging that they want to transfer half of their shares to a new entity. One of the things that will be included in this form is the number of shares the shareholder is transferring and how much the sale cost (if it is not a gift). After submitting, the company will now issue two share certificates to the shareholder whose shares have been transferred and the purchaser.
Transmission of shares, on the other hand, is initiated by a Legal heir or receiver. The legal heir will file an application with the company. Vital documents, such as the death certificate, probate, succession certificate, etc., will be attached to the application. After submitting it to the company, the company will then review the documents to check their legality, and if found genuine, they will approve the transmission request.
The procedure for transferring and transmitting shares in private companies in British Columbia is complex. If you are planning on transferring or transmitting your shares, it is important to seek legal advice from a qualified lawyer. Steven and Company Law Corporation can help you with all aspects of the transfer and transmission of shares, including preparing the necessary documentation and advising you on the tax implications of the transaction. Contact us at 1-250-248-8220 today to find out how we can help you with your share transfer or transmission.