Transfer and Transmission of Securities

Transfer of Shares: It refers to intentionally transfer of shares from one person to another. Person who transfers the shares is called transferor and the person who receive the shares known as transferee.

Transmission of shares: When shares has been transferred due to operation of law. If the shareholder is dies or lunatic or insolvent, his shares will automatically transfer to the Nominee shareholder and if there is no nominee, legal representative became the owner of the shares. In the case of insolvency, the shares will be transferred to the official assignee of the transferor.

The shares of Listed Company are freely transferable through stock exchange. In the case of Public and Private Company certain procedure required to follow by the company.

Applicable provisions: Section 56 of the Companies Act, 2013 read with Rule 11 of Companies (Share Capital and Debentures) Rules, 2014.

As per section 56 (1): A person can transfer their shares in the favour of transferee by executing  proper instrument of transfer, in the Form SH 4,which is duly stamped, dated and executed by or on behalf of the transferor and the transferee and specifying the name, address and occupation, if any.

Proviso:

1. An instrument of transfer of securities held in physical form shall be in Form No.SH.4 and every instrument of transfer with the date of its execution specified thereon shall be delivered to the company within 60 days from the date of such execution.

2. In the case of a company not having share capital, provisions of sub-rule (1) shall apply as if the references therein to securities were references instead to the interest of the member in the company.

Section 56(2): Section 56(1) not applicable in case of transmission of any right to securities by operation of law and any person to whom such right has been transmitted.

Section 56(3): A company shall not register the transfer of party paid ups shares, unless the company has given notice in the Form SH 5 to the transferee and transferee has given NOC within 2 weeks from the date of receipt of notice.

Section 56(4): Time Limit of Delivery if certificate of shares unless prohibited by the court, Tribunal or any other authority are mentioned below:

Proviso: Provided that where the securities are dealt with in a depository, the company shall intimate the details of allotment of securities to depository immediately on allotment of such securities.

Section 56(5): The transfer of any security or other interest of a deceased person in a company made by his legal representative shall, even if the legal representative is not a holder thereof, be valid as if he had been the holder at the time of the execution of the instrument of transfer.

Section 56(6): If any default is made in complying with the provisions of section company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.

Section 56(7): Without prejudice to any liability under the Depositories Act, 1996, where any depository or depository participant, with an intention to defraud a person, has transferred shares, it shall be liable under section 447.

KEY POINTS:

1. In case of Death of transferor, Legal Representative or legal heir will get the shares.

2. In case of Insolvency of transferor, official assignee will get the shares.

3. In case of joint shareholding, the survivors or remaining holders are entitled for the shares.

4. No transfer deed is required in case of transmission.

5. No stamp duty is payable at the time of transmission.

Documents required for transfer of shares:

CTC of transfer

Form SH 4

Request Form for transfer of shares

Share certificate

Documents required for transmission:

CTC of death

Probate Certificate

Succession Certificate

Signature of successor

STAMP DUTY AT THE TIME OF TRANSFER

TRANSPOSITION OF NAME:

In the case of joint-shareholders, one or more of them may require the company to alter or rearrange the serial order of their names in the register of members of the company. In this process, there will be need for effecting consequential changes in the share certificates issued to them. If the company provides in its articles that the senior-most among the joint-holders will be recognized for all purposes like service of notice, a copy of balance sheet, profit and loss account, voting at a meeting etc., the request of transposition may be duly considered and approved by the Board or other authorized officer of the company.

Since no transfer of any interest in the shares take place on such transposition, therefore Transfer deed and Stamp Duty both are not required in the process of transposition.

For e.g. If  the shares are held in the name of shareholder A & B and in the same sequence they are recorded  in the Register of members but the shareholders wants to re-arrange the name in the sequence of B & A. The shareholder has to submit their request to the company in transposition form along with share certificate. Company may change the pattern of their name accordingly.

REFUSAL OF REGISTRATION AND APPEAL AGAINST REFUSAL

As per section 58 of the Companies Act, 2013 if the private company or public company refuse to register any transfer or transmission of securities of shareholder, company shall within 30 days from the date of on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferor and the transferee or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal.

Transferee may file appeal against the refusal of transfer and transmission as the case may be, in the below mentioned time period:

The Tribunal, while dealing with an appeal made may, after hearing the parties, either dismiss the appeal, or by order—

1. Direct that the transfer or transmission shall be registered by the company and the company shall comply with such order within a period of 10 days of the receipt of the order; or

2. Direct rectification of the register and also direct the company to pay damages, if any, sustained by any party aggrieved.

If a person contravenes the order of the Tribunal under this section, he shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to three years and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

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Disclaimer: –The above mentioned article has been based on relevant provisions of Companies Act, 2013. Under no circumstance, the author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.