Transmission / transfer of shares in a Company


Overview: The shares can be transferred by the shareholder to the company. The article describes the same.

 

Purpose: The purpose of this article is to provide a general overview of the law and procedure to be followed for this transmission of shares.

Areas of Application of Law: Companies Act, 2013, Companies (Share Capital & Debentures) Rules 2014

 

Process:

The text of law on Transfer and transmission of securities as per Companies Act, 2013 is as below:

Section 56 (1): A company shall not register a transfer of securities of the company, or the interest of a member in the company in the case of a company having no share capital, other than the transfer between persons both of whose names are entered as holders of beneficial interest in the records of a depository, unless a proper instrument of transfer, in such form as may be prescribed, duly stamped, dated and executed by or on behalf of the transferor and the transferee and specifying the name, address and occupation, if any, of the transferee has been delivered to the company by the transferor or the transferee within a period of sixty days from the date of execution, along with the certificate relating to the securities, or if no such certificate is in existence, along with the letter of allotment of securities:  

Provided that where the instrument of transfer has been lost or the instrument of transfer has not been delivered within the prescribed period, the company may register the transfer on such terms as to indemnity as the Board may think fit.

(2) Nothing in sub-section (1) shall prejudice the power of the company to register, on receipt of an intimation of transmission of any right to securities by operation of law from any person to whom such right has been transmitted.

(3) Where an application is made by the transferor alone and relates to partly paid shares, the transfer shall not be registered, unless the company gives the notice of the application, in such manner as may be prescribed, to the transferee and the transferee gives no objection to the transfer within two weeks from the receipt of notice.

(4) Every company shall, unless prohibited by any provision of law or any order of Court, Tribunal or other authority, deliver the certificates of all securities allotted, transferred or transmitted—

(a) within a period of two months from the date of incorporation, in the case of subscribers to the memorandum;

(b) within a period of two months from the date of allotment, in the case of any allotment of any of its shares;

(c) within a period of one month from the date of receipt by the company of the instrument of transfer under sub-section (1) or, as the case may be, of the intimation of transmission under sub-section (2), in the case of a transfer or transmission of securities;

(d) within a period of six months from the date of allotment in the case of any allotment of debenture:

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.

(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.

(6) Where any default is made in complying with the provisions of sub-sections (1) to (5), the 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.

Rule 11 of Companies (Share Capital & Debentures) Rules 2014: Instrument of transfer.-

1.      An instrument of transfer of securities held in physical form shall be in Form SH.4 and every instrument of transfer with the date of its execution specified thereon shall be delivered to the company within sixty (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.

3.      A company shall not register a transfer of partly paid shares, unless the company has given a notice in Form No. SH.5 to the transferee and the transferee has given no objection to the transfer within two weeks from the date of receipt of notice.

Usually following steps shall be followed by a private company to give effect to the transfer of shares:—

1. Transferor has to give a notice in writing for his intention to transfer his share to the company.

2. The company then has to give notice to other members about the shares and the price at which such share would be available to them along with the time limit within which they should make their decision and exercise their option to purchase shares on transfer.

3. The company will accept the transfer if no member exercised the option to purchase the shares.

4. Share transfer deed in form SH-4 duly is executed both by the transferor and the transferee. It should be stamped according to the Indian Stamp Act and Stamp Duty Notification in force in the State concerned.

5. The transaction has to be witnessed by a person giving his signature, name and address.

6. The share transfer deed should be deposited with the company within sixty (60) days from the date of such execution by or on behalf of the transferor and by or on behalf of the transferee along with the share certificates.

7. Finally, a board resolution has to be passed and transfer effected.

Documents required to be submitted: share certificates, allotments letters etc.

Punishment/Expected Relief: transfer/transmission of shares

User Comments


×

C2RMTo Know More

Something Awesome Is In The Work

0

DAYS

0

HOURS

0

MINUTES

0

SECONDS

Sign-up and we will notify you of our launch.
We’ll also give some discount for your effort :)

* We won’t use your email for spam, just to notify you of our launch.
×

SAARTHTo Know More

Launching Soon : SAARTH, your complete client, case, practise & document management SAAS application with direct client chat feature.

If you want to know more give us a Call at :+91 98109 29455 or Mail info@soolegal.com