What Is a Letter of Transmittal?

by Fraser Sherman - Updated July 23, 2018
A letter of transmittal introduces a second document.

If someone mails you a complicated document such as a grant proposal or a report, it often arrives with a letter of transmittal. This is a simple, short letter explaining what the document is, and why you're getting a copy. An executive summary in a report or proposal condenses the document to a few paragraphs; a transmittal memo or letter puts the report in context. They're also used for mailing stock certificates after mergers.

Tips

  • Businesses define a letter of transmittal as a short letter accompanying another document – the letter tells you what the document is and why it arrived in your mailbox.

Using a Letter of Transmittal

Reports and proposals often come with an executive summary. This sums up the document in a few paragraphs so a busy executive can get the gist of the report. The message of a transmittal letter is much simpler: Here is a document. This is what it's about. This is why I sent it to you. You don't summarize the contents of the document, you just define what they are. You also provide contact information in case the recipient has questions.

If there are particular issues, such as a report that didn't reach the expected conclusions, you can mention them in the letter of transmittal. You don't have to go into a lot of detail, though – the transmittal memo should be concise. You can find transmittal templates online to help you write one up.

Mailing Stock Certificates

Transmittal letters play a big, sometimes controversial role in corporate mergers. When a merger goes through, the new company takes back old stock and reissues stock in the new firm. If investors own hard-copy stock certificates, the company attorneys mail out letters of transmittal asking the investors to sign the letter and send the certificates back. Even if there are no paper certificates, companies may ask shareholders to sign the transmittal memo before receiving payment for their shares in the old company.

What makes it controversial is that corporate attorneys sometimes put language into the letter banning the signer from suing. Stockholders who don't support a merger or buyout – they don't think the share price is good enough, for instance – sometimes sue the company. The letter says they either give up that right or they don't receive payment for their shares.

A 2014 court decision ruled against the corporation in one stockholder suit. The decision said stockholders were entitled to money for their shares so the corporation couldn't refuse to pay non-signers. Attorneys in the mergers and acquisitions field have developed approaches to get the same result while staying within the law.

About the Author

Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs.

Photo Credits

  • glasses on the paper image by Elena Vdovina from Fotolia.com
Cite this Article A tool to create a citation to reference this article Cite this Article