Why Shares Passed Under a Will Should Not Attract Stamp Duty on Transfer

A recent Court of Appeal decision (Loh Siew Choong & Ors v Toong Yuen (Ipoh) Sdn Bhd & Ors) is a reminder that a transfer and a transmission of shares are not the same, and the difference decides whether stamp duty arises when shares pass under a will.

A transfer is an act of the shareholder, made by a duly executed and stamped instrument of transfer, and it attracts stamp duty. A transmission happens by operation of law, such as through a will and probate, and no stamp duty is imposed on it. The Companies Act 2016 preserves the company's power to register a person to whom shares are transmitted by operation of law. Once that person notifies the company in writing, the company must register the person within sixty days, failing which the company and its officers commit an offence.

In this case, a shareholder left her shares by will, and the shares were first registered in the executor's name. The executor later asked the company, in writing, to register portions of those shares in the names of three beneficiaries under the will. The board refused, saying a further transmission did not arise, and the High Court agreed, treating the step as a transfer subject to the stamped instrument requirement and the company's articles of association.

The Court of Appeal disagreed. Registering a deceased person's shares in a beneficiary's name under the will and probate is a transmission, not a transfer. The beneficiary takes the shares by virtue of the will, and the executor's assent simply allows the will to take effect. The transfer restrictions in the articles did not apply, and the company was required to register the beneficiaries.

Alleged debts owed by the beneficiaries to the estate were also not a lawful ground to refuse, as the estate can recover them through a separate claim.

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