Transferability of shares is an absolute right of the shareholder
which cannot be denied even by the articles. Section 82 empowers every
shareholder to transfer his shares in the manner laid down in the articles and
in accordance with the various provisions of the law.
Transfer of share in Private
Company: A private company is statutorily under obligation to place certain
restrictions on the right of its members to transfer shares. One of the
restrictions on transfer of shares in a private company is the “Pre-emption Clause”
which states that the transferor must offer his shares to the existing members
of the company, before offering them to non-members, so long as a member is
willing to purchase them at a fair price to be determined in accordance with
the articles.
Transfer of shares in Public
Company: In the case of public company also, there are some restrictions on
the right of members to transfer shares. Regulation 21(Table A) provides that
the board of directors may refuse to register the transfer to partly paid shares
to a person of whom they do not approve. The board of directors may also refuse
to register the transfer of any shares on which the company has a lien.
Provisions regarding transfer of
shares are:
1. It should be
in accordance with the articles
2. The transfer
deed to be presented before the registrar for the notification of date on the
blank form
3. Form should
be duly filled up as per form 7B.
4. It should be
duly stamped.
5. And after
this share certificate is to be attached and then sent to the company.
Time required within which the transfer must
be registered:
1. In case
where the shares are dealt in stock exchange, 12 months from the date mentioned
in the deed or before the closure of the register whichever is later.
2. In any other
case within 2 months from the date specified in the deed. Time period for the
registration can be extended with the help of Form 7C by applying to the
register.
Notice of refusal: Where a
company refuses to register the transfer, whether in pursuance of any power of
the company under its articles or otherwise, it shall within two months send
notice of refusal to the transferee and the transferor giving reason for such
refusal.
Blank
Transfer and Forged Transfer
Blank Transfer: When a share
transfer form is signed by the shareholder without filing in the name of the
transferee and date of transfer and hands it over along with share certificate
to the transferee thereby enabling him to deal with shares, it is called a
transfer in ‘Blank’ or ‘Blank Transfer’. The ownership of shares in a company
is generally transferred from one person to another by producing of a document
from the seller to the buyer. This document is described as a ‘transfer
instrument’ or ‘transfer deed’ or merely ‘transfer’. Because of the convenience
associated with the blank transfer, the shares are usually sold and produced
through blank transfer. Blank transfer results in saving of stamp duty. It is
to be affixed only by the last transferee who lodges the shares with the
company for the purpose of registration of transfer. The title of the
transferee acquiring shares through a blank transfer shall invariably by
subject to the title of the transferor.
A transfer
in blank, when accompanied by a share certificate, brings to the transferee
both the legal and equitable rights to the shares and also the rights to call
upon the company to register the transfer.
Forged Transfer: An
instrument on which the signature of the transferor is forged is called forged
transfer. It is a null transfer and does not confer any title. It is so because
in case of forgery there is not merely an absence of free consent but there is
no consent at all. Hence, this transfer will never confer an ownership upon the
transferee, however important the transaction may appear it. If the company
registers any forged transfer, the real owner can apply to the company for the
rectification and get his name placed back in the register.
Rights of
the aggrieved party against refusal to transfer the shares:
1. Right to make an appeal to the company law
board: The transferor or the transferee has the right to make an appeal
to the Company Law Board against any refusal by the company to register the
transfer or against any failure on its part within two months of the receipt of
the notice of such refusal. Or where no notice has been sent by the company,
within four months from the date on which the instrument of transfer was
delivered to the company.
2. Right to apply to the Company Law Board for
rectification of the register: The person aggrieved or any member of the
company may apply to the CLB for rectification of the register if the name in
register of member without any sufficient cause or default is made or
unnecessary delay take place in entering in the register the fact of any person
having become or erased to be a member.
Certification of Transfer
Where a
shareholder desires to transfer only some of the shares represented by a share
certificate or desires to sell the shares to different person then the
transferor is required to hand over the share certificate to be lodged along
with the share transfer from the company. Where the transferor has already
lodged with the company the required share certificate, along with an
instrument if transfer for part of the shares, he may request the company to
certify on the instrument of the transfer, that the share certificate for the
shares covered by the instrument of transfer has been lodged with the company.
This is called as certification.
According to
section 112(3) (a) an instrument of transfer shall be deemed to be certificate,
if it possess the word ‘Certificate lodged’ or the words to the same effect.
Therefore, certification is the act of noting by the secretary etc. specifying
that the share certificate has been lodged with the company.
When the
transferor transfers only a portion of his shares, the company usually issues
him tickets for the balance of shares which have not been transferred. These
tickets are called “Balance Ticket”.
Section 112
provides that certification is simply a representation by a company to any
person acting on the faith of it that there has been a prima facie title in the
transfer.
The company
will be liable for the certification only if:-
(i) The
instrument of transfer is certified with the words ‘Certificate Lodged’ or
words to the same effect.
(ii) An
authorized person issues the certification instrument on behalf of the company.
(iii) The
certificate is signed by any officer or servant of the company or any other
person authorized to certify transfer on the company’s behalf.
Transmission of shares
When the
shares are transferred under the operation of law it is called transmission of
shares. Transmission of shares takes place:-
(i) When the
registered shareholder dies.
(ii) When he is
declared insolvent.
(iii) In case where
the shareholder is the company, it goes into liquidation.
In case of the death of
registered shareholders, his legal representative becomes the care taker of the
shares. The legal representative if he can sells the shares without being
registered, if he does not want to become the member of the company. In case he
wants to become the member of the company, he should send a written and signed
notice to the company disclosing his decision.
In case of the insolvency, the
official assigner has the power to take the decision regarding selling of the
shares, transferring of the shares or getting himself registered as a member.
In case where a shareholding company goes
into liquidation then the liquidator of the company may sell and transfer the
shares.
Difference
between transfer of shares and transmission of shares
|
Basis
|
Transfer of shares
|
Transmission of shares
|
|
Nature
|
Transfer
of shares takes place by a voluntary a deliberate act if the transferor.
|
Transmission
is the result of the operation of law.
|
|
Instrument
used
|
In case of
transfer, the transferor and transferee have to execute an instrument of
transfer
|
The shares
are transmitted on the death insolvency of member and instrument of transfer
is not required only a proof of his title to the shares is required.
|
|
Method
|
Transfer
is the normal method of transferring property in the shares
|
Transmission
of share takes place only on the death or insolvency or liquidation.
|
|
Stamp duty
|
In case of
transfer stamp duty is payable on the amount of the market value of shares
|
No stamp
duty is payable in case of transmission.
|
Post a Comment
Kindly give your valuable feedback to improve this website.