BUSINESS LAW PRESENTATION

TOPIC- Transfer of Shares

 Meaning: It is the change of ownership of shares to someone else with due registration with the company. It is a process of changing a title to shares with the approval of the company. There are two parties involved in the transfer of shares. The one who transfer the share in the name of another person is known as transferor and the person to whom the share are transferred is known as transferee.

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 PROCEDURES REGARDING TRANSFER OF SHARES:

(1) Verification of legal provision: The secretary has to check if there is a provision in the Articles of Association regarding the transfer of shares. If there is a provision in the Articles, he will go ahead regarding the transfer of shares, if there is no provision he cannot go ahead with the procedure of transfer of shares. (2) Receipt of documents for transfer: The transferor and transferee jointly, submit the share transfer form duly completed, signed and stamped for the purpose of transfer at the company's office. The share certificate is also submitted. (3) Verification of transfer documents: The secretary has to check the transfer documents submitted by the transferor and the transferee. He also has to see that the share certificate has been attached along and it is certified one and it is submitted within the prescribed time limit. The secretary should also verify
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all the details given in the transfer documents and see if they are in order. (4) Acknowledgment of instrument of transfer: The secretary issues a 'Kutcha Receipt' acknowledging receipt of the instrument of transfer. He has to check the documents received and if he is satisfied then issue a formal "Transfer Receipt" to the transferor in exchange for the Kutcha receipt. (5) Issue of notice of transfer to transferor and transferee: The secretary then issues a notice of lodgement of transfer to the transferor and transferee requesting them to send their objection, if any within fourteen days after they receive the notice. (6) Entry in the transfer register: If no objections have been received by either the transferor and the transferee, the secretary then enters the details of the transfer in the Transfer
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Register. He has to get the old share certificate endorsed in the name of the transferee. (7) Board meeting for the approval of transfer: A meeting of Board of Directors will be called. In this meeting, a resolution will be passed regarding the transfer of shares. Once the resolution has been passed, the secretary has to remove the name of the transferor from the Register of members and include the name of the transferee. (8) Intimation to Transferee and dispatch of share certificate: Once the transfer is initiated, the secretary will inform the transferee about the transfer and that the share holders may come and collect his new share certificate or endorsed certificate against the transfer receipt. For those

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transferees who cannot come to collect the new share certificate, it will be sent to their registered addresses as per the instructions of the transferee. Transfer Deed is compulsory for share transfer In Companies Act, 1956 transfer of share is governed by Section 108. As per section 108 registration of transfer of shares is possible only if a proper transfer deed in Form 7B duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company, along with the share certificate.

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Restriction in Private company on the right to transfer its shares [Section 3(1)(iii)] Section 3(1)(iii)(a) of the Companies Act, 1956 provides that the Articles of a private company shall restrict the right to transfer the company's shares. Normally 100% shareholding of a private company may be owned by a family or other private group. Cases where Restriction on transfer not applicable Restriction upon transfer of shares in private company not applicable in the following cases: (i) on the right of a member to transfer his/her shares to his/her representative(s). (ii) in the event of death of a shareholder, legal representatives may require the registration of share in his/her name.
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Transfer of shares in a public company Section 111A(2) provides that the shares or debentures of a public company shall be freely transferable. Provided that if a company without sufficient cause refuses to register transfer of shares within two months from the date on which the instrument of transfer or the intimation of transfer, as the case may be, is delivered to the company, the transferee may appeal to the Company Law Board/ Tribunal and it shall direct such company to register the transfer of shares.

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Checklist to be followed for transfer of shares (i) Arrange share transfer deed (Form 7B). It should be endorsed by the prescribed authority. This deed can also be used for the transfer of debenture. (ii) Get the transfer deed duly executed both by the transferor and the transferee as desired by sections 108 and 109 of the Act and the Articles of Association. (iii) The transfer deed should bear stamps according to the Indian Stamp Act and Stamp Duty Notification in force in the State concerned. (iv) Do not forget to cancel the stamps affixed on the transfer deed at the time or before signing of the transfer deed. (v) The signatures of the transferor and the transferee in the share transfer deed must be witnessed by a person giving his signature, name and address.
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(vi) Attach the relevant share or debenture certificate or allotment letter with the transfer deed and deliver the same to the company within the time limits. (vii) Where the application is made by the transferor and relates to partly paid-up shares, the company has to give due notice of the amount due on shares/debentures to the transferee and the transferee shall raise objection, if any within two weeks from the date of receipt of the said notice. (viii) If signed transfer deed has been lost, affix the same stamp on a written application. In such case, the Board may, if it thinks fit to do so, register the transfer on such terms of indemnity as it thinks fit. Difference in the signature of transferor One of the reason for refusal of transfer of shares is the difference in the signature(s) of the transferor in the share transfer deeds with the specimen signatures available in the records of the company. To avoid
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this situation, it is advisable to provide an option to the members for furnishing fresh specimen signatures for the records of the company. Remedy for refusal of transfer of Shares Appeal against refusal to register transfer of shares In the case of refusal, the transferee may appeal to the CLB/Tribunal against any refusal by the company to register the transfer or transmission. This appeal can also be preferred where there is delay on the part of the company to send notice of its refusal to register the transfer within the period of two months. [Section 111(2)]. Such appeal to the Company Law Board/Tribunal under Section 111(2) of the Act shall be made within two months of the receipt of the notice of such refusal or, where no such notice has been sent by the company, within four months from the date on which the instrument of transfer, or the intimation of transmission, as the case may be, was delivered to the company. [Section 111(3)].
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THANK YOU

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