Q.Explain how transmission of shares occurs on the death of a shareholder, and who becomes entitled to the shares.

The death of a shareholder is the most common trigger for transmission, and the law is clear about exactly who steps into his place.

Death of a member is, in ordinary practice, the single most common circumstance in which transmission of shares actually happens. When a shareholder dies, his shares do not simply disappear, nor do they automatically pass to the company — they remain part of his estate and pass, by the general law of succession, to whoever is legally entitled to represent that estate.

The specific person who becomes entitled depends on whether the deceased left a valid will:

• If the deceased left a will, the will typically names an executor to carry out its terms, and this executor becomes the deceased's legal representative for the purpose of claiming the shares, on production of a probate of the will (the court's formal certification that the will is genuine and that the executor is authorised to act under it).
• If the deceased died without a valid will (intestate), the law of intestate succession applicable to him determines his legal heirs, and one of them — or a person appointed for the purpose — obtains letters of administration from a competent court, or, in simpler cases, a succession certificate, to establish his authority to claim the shares on behalf of the heirs. …

A frequent error is assuming that a deceased member's shares automatically pass to his 'next of kin' without any documentary process — the company can register the transmission only on the basis of the correct legal document (proba …