TRANSFER OF SHARES
Shares are a moveable property. The most important feature of a company is that its shares are transferrable. This is one of a right of the shareholder that they can transfer its shares. When shares are transferred the contractual relationship is assigned to the transferee who needs an instrument of transfer. Transferring of the shares involves many steps, firstly an agreement to sell which is known as a Share Transfer Deed, then execution of a deed of transfer and finally registration of the transfer.
When the transfer takes place the persons required to be present there are the Subscribers to the memorandum, Legal Representative, in case of a deceased, Transferor, Transferee, Company (listed/non-listed).
PROVISION RELATED TO TRANSFER OF SHARES:
- Instrument for Transfer of Share is compulsory: Section 56 provides that a company shall not register a transfer of shares of, the company, unless a proper transfer deed in Form SH.4 as given in Rule 11 of Companies (Share Capital & Debentures) Rules 2014 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 certificate relating to the shares, or if no such certificate is in existence, along with the letter of allotment of the shares.
- Time Period for deposit of Instrument for Transfer: An instrument of transfer of shares i.e. Form SH.4 with the date of its execution specified thereon shall be delivered to 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.
- Value of share transfer stamps to be affixed on the transfer deed: Stamp duty for transfer of shares is 25 paise for every Rs. 100 or part thereof of the value of shares as per Notification No. SO 130(E), dated 28-01-2004 issued by the Ministry of Finance, Department of Revenue, New Delhi.
- Time limit for issue of certificate on transfer: Every company, unless prohibited by any provision of law or of any order of any Court, Tribunal or other authority, shall, within One month deliver, the certificates of all shares transferred after the application for the registration of the transfer of any such shares, debentures or debenture stock received. 5. Time Limit for Refusal of registration of Transfer: Provisions related to Refusal of registration and appeal against refusal is given in Section 58 of the Companies Act, 2013. Power of refusal to register transfer of shares is to be exercised by the company within thirty (30) days from the date on which the instrument of transfer or the intimation of transfer, as the case may be is delivered to the company.
- Time Limit for appeal against refusal to register Transfer by Public Company: As per section 58(4), a transferee of shares may, within a period of sixty (60) days of such refusal or where no intimation has been received from the company, within ninety (90) days of the delivery of the instrument of transfer or intimation of transmission, appeal to the Tribunal.
- Shares and Debentures: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. The 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.
- Instrument of Transfer: The company shall not register a transfer of securities of the company 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: 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.
- Transfer of Partly Paid Up share: 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.
PROCEDURE OF TRANSFER OF SHARES
Section 58(2) provides that the shares or debentures and any interest therein of a public company shall be freely transferable. Usually following steps shall be followed by a private company to give effect to the transfer of shares
- Get the Share transfer deed in form SH-4 duly executed both by the transferor and the transferee.
- The transfer deed should bear stamps according to the Indian Stamp Act and Stamp Duty Notification in force in the State concerned. The present rate of transfer of shares is 25 Paise for every one hundred rupees of the value of shares or part thereof. Do not forget to cancel the stamps affixed at the time or before signing of the transfer deed.
- 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.
- Attach the relevant share certificate or allotment letter with the share transfer deed and deliver the same to the company. 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.
- After receipt of share transfer deed, board shall consider the same. If the documentation for transfer of share is in order, board shall register the transfer by passing a resolution.
TRANSMISSION OF SHARES
Transmission is the transfer of title by proper operation of law. A transmission of interest in shares of a company, of a deceased member of the company, made by the legal representative of a deceased member shall be considered as transmission of shares by operation of law. This transmission will be registered by a company in the Register of Members.
PROVISIONS RELATED TO TRANSMISSION OF SHARES:
- Person eligible to apply for transmission of shares: Joint holdings survivors can get the shares transmitted in their names by production of the death certificate of the deceased holder of shares.In other words, in case of joint holding, the survivor or survivors shall only be entitled for registration and the legal heir of the deceased member shall have no right or claims.
- No requirement of Transfer Deed:The execution of Transfer Deed is not required in the case of transmission of shares. Application of Transmission accompanied with relevant documents would be enough for valid transmission request.
- Documents Required:In case of transmission of shares by operation of law, it is not necessary to execute and submit transfer deed. A simple application to the company by a legal representative along with the following necessary evidences is sufficient:—
- Certified copy of death certificate;
- Succession certificate;
- Specimen signature of the successor.
- Liability on the Shares: In the case of transmission of shares, shares continue to be subject to the original liabilities.
- Payment of consideration or stamp duty not required: Since the transmission is by operation of law, payment of consideration or payment of stamp duty would not be required on instruments for transmission.
- Time Limit for issue of share certificate on transmission:Every company within 1 month deliver, the certificate of all shares transmitted after the application for the registration of the transmission of any such shares received.
- Time Limit for Refusal of registration of transmission: The Power of refusal to register transmission of shares is to be exercised by the company within thirty 30 days from the date on which the intimation of transmission is delivered to the company.
- Time Limit for appeal against refusal to register Transmission by Public Company: As per section 58(4), the person who gave intimation of the transmission by operation of law may, within a period of sixty (60) days of such refusal or where no intimation has been received from the company, within ninety (90) days of the delivery of the intimation of transmission, appeal to the Tribunal against such refusal
PROCEDURE FOR TRANSMISSION OF SHARES:
Filing of the Application: The survivor in the case of joint holding shall file application with the company with the required documents which are mentioned above.
Issuing Reference Number: The Company records the particulars of the death certificate and a reference number of recording entry is given to the shareholder so as to enable him to quote such number in all future correspondence with the company.
Verification of the Documents: The Company will then verify the documents submitted with the transmission request. They shall then approve the transmission request and register the shares in the name of the survivor or legal heir.
Refusal of the Transmission Request: If the documents submitted with the transmission request are not in order, it is a case of refusal. The company will then within thirty 30 days, from the date on which the intimation of transmission is delivered to the company, communicate refusal to the concerned person.
Payment of Dividend: Dividend declared before the death of the shareholder will be payable to legal representative but dividend declared after the death of a member can be paid to him only after registration of his name and till that period it has to be kept in abeyance.