Transmission of Shares on Death or Bankruptcy Is Not a Transfer

A shareholder in a two-person Sdn Bhd dies. The surviving director asks the secretary to “do a share transfer to the widow”. That instruction is wrong in almost every particular — wrong section, wrong documents, wrong deadline, and it points at a stamp duty charge that may not arise.

What has happened is a transmission, and the Act deals with it separately.

Transfer and transmission are different events

A transfer is a voluntary act by a living shareholder, effected by a duly executed and stamped instrument under s.105(1) and registered within 30 days under s.106(1).

A transmission is the passing of the right to shares by operation of law — on death or bankruptcy. Nobody signs anything to make it happen; the law moves the entitlement and the paperwork catches up.

Section 105(4) draws the line expressly:

Subsection (1) shall not affect any power of a company to register a person as a shareholder or debenture holder to whom the right to shares or debentures has been transmitted by operation of law.

So the requirement for a duly executed and stamped instrument does not reach a transmission. Section 105(5) then adds a definitional point that trips people up: “instrument of transfer” includes a written application for transmission of a share, debenture or other interest to a personal representative. The written application is treated as falling within the term for the purposes of s.105 — which is why practitioners sometimes describe the process using transfer vocabulary even though the substantive rules differ.

The section 109 procedure

Step	Requirement	Section
Right passes by operation of law	Death or bankruptcy of the shareholder	s.109(1)
Person entitled notifies the company in writing that they wish to be registered	The trigger for the whole section	s.109(1)
Company accepts the grant as sufficient evidence	Probate or letters of administration	s.109(4)
Company registers the person	within 60 days of receiving the notification	s.109(5)
Company notifies SSM of the register change	within 14 days of the change	s.51(1)

Section 109(7) identifies who is entitled on a death:

• (a) where the deceased was a sole holder — the legal personal representatives
• (b) where the deceased was a joint holder — the survivor

with the closing words preserving the deceased joint holder’s estate’s liability in respect of any share jointly held.

Section 109(6) confirms the consequence of registration: the registered holder gets the same dividends and other advantages, and the same rights in relation to meetings, voting and otherwise.

Section 109(8) makes contravention an offence for the company and every officer, with a fine up to RM10,000 and RM500 per day for a continuing offence.

The election that turns transmission back into transfer

Section 109(2) covers the common case where the executor does not want the shares in their own name:

…if the person referred to in that subsection elects to have another person registered, he shall testify his election by executing to that person a transfer of the share or debenture.

At that moment the transaction changes character. Section 109(3) applies all the limitations, restrictions and provisions of the subdivision relating to the right to transfer and the registration of transfers to that notice or transfer — as if the death or bankruptcy had not occurred and the document were signed by the deceased or bankrupt shareholder.

Practically, that means the transfer route applies to the onward step: an instrument, the s.106(1) thirty-day registration duty, the refusal machinery, any pre-emption or director discretion in the constitution, and the Stamp Act 1949 obligation to stamp within 30 days of execution.

This is the fork the market misses. Registering the executor is transmission. Registering the beneficiary or a buyer instead is a transfer executed by the executor, and everything that attaches to a transfer attaches to it.

Stamp duty: why the treatment differs

Item 32(b) of the First Schedule to the Stamp Act 1949 charges 0.3% on the transfer of shares, on the price or the value, whichever is greater, with the transferee liable under item 5 of the Third Schedule.

That charge attaches to an instrument. In a pure transmission there is no instrument of transfer between two parties — there is a grant of probate and a written notification. Where the personal representative elects under s.109(2), there is a transfer instrument, and the ordinary charge and the 30-day s.47 deadline apply to it.

Because the outcome turns on which documents are actually executed rather than on a label, and because adjudication practice matters here, confirm the treatment with LHDN for the specific documents before assuming no duty arises. That question is recorded in this article’s verification list rather than answered from secondary sources.

Trustees and executors on the register

Section 110(1) allows a trustee, executor or administrator of a deceased person’s estate who was registered as the holder to become registered as holder in that representative capacity, and limits their liability to what the deceased would have faced had the share remained in the deceased’s name.

Section 110(2) extends the same protection where the deceased was beneficially entitled but not the registered holder, with the consent of the corporation and of the registered holder.

Registering in a representative capacity is worth doing deliberately. It is the difference between an executor holding shares as executor and an executor holding shares personally with the liability that follows.

Notices and meetings in the meantime

Section 321(2) covers the gap between death or bankruptcy and registration: the reference to a member entitled to notice of a meeting includes a person entitled to a share in consequence of the death or bankruptcy of a member who, but for that event, would have been entitled to receive notice — provided the company has been notified of that entitlement in writing.

So the written notification does two jobs. It starts the s.109(5) sixty-day clock, and it puts the person entitled onto the notice list for members’ meetings. Until it is given, the company is entitled to treat the registered shareholder as the only person entitled to vote, receive notices and receive distributions under s.101(2).

What else the death triggers

• Beneficial ownership. Where the deceased was a beneficial owner or the transmission changes who ultimately controls the company, the Division 8A clocks run: entry in the internal register within 14 days of receipt under s.60C(4), then lodgement through e-BOS within 14 days of that entry under s.60B(3) and (4).
• The board. If the deceased was also the sole director, s.209(5) allows the Registrar to strike the company off where no director has been appointed within six months of the last director’s death. That is a much harder deadline than anything in s.109.
• Share certificates. Where a certificate was issued and cannot be found, s.104 and s.98(2) allow registration on evidence of loss or destruction.

Common mistakes

Preparing a transfer instrument to register the executor. Section 105(4) removes the need for one. What the company wants is the written notification and the grant.

Applying the 30-day clock. Section 109(5) gives 60 days from the notification. Section 106(1)‘s 30 days belongs to transfers.

Demanding a death certificate plus statutory declarations plus an indemnity. Section 109(4) obliges the company to accept the grant of probate or letters of administration as sufficient evidence of the grant.

Registering the beneficiary directly without a transfer. If the person entitled wants someone else on the register, s.109(2) requires them to execute a transfer to that person, and s.109(3) applies the transfer rules to it.

Forgetting the s.51 notification. The register entry is one duty; telling SSM within 14 days is another.

Ignoring the survivor rule on joint holdings. Under s.109(7)(b) the survivor takes, not the estate — which is frequently the opposite of what the will says, and worth raising with clients before it becomes a dispute.

What’s next

Get the written notification in early, dated and acknowledged. It starts the 60-day clock, and under s.321(2) it also secures the person’s right to receive notice of members’ meetings while the estate is administered.

For the voluntary sale route, including stamping and the 30-day register duty, see share-transfer. For the duty computation where a transfer instrument is executed, see stamp-duty-share-transfer.