The word 'transfer' is an act of the parties by which title to property is transferred from one person to another. Under Section 82 of the Companies Act, 1956, the shares of any member in the company are movable property, transferable in the manner provided by the articles of associations of the company.
REGISTRATION OF SHARE TRANSFER
Section 108 and Regulation 19 to 24 of Table A of Schedule I to the Companies Act, 1956 deal with transfer and transmission of shares issued by a company registered in India. Section 108 of the Companies Act, 1956 regulates the registration of transfer of shares of the Company. Sub-section (1) lays down that a company shall not register transfer of its shares unless a proper instrument of transfer 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 share certificate is in existence, along with the letter of allotment of the shares.
The stamp duty under article 62(a) of Schedule I to the Indian Stamp Act, 1899 on the transfer of shares in a company, for every one hundred rupees or part thereof of the market value of shares has been 25 Paisa.
Every instrument of transfer shall be in Form-7B and in case of company whose shares are listed over the counter (OTC) exchange of India, the instrument of transfer shall be in Form-7BB. In relation to every offer of a scheme or contract involving the transfer of shares or class of shares in the transferor or company to the transferee company, every offer or every circular containing such offer or the transferor company by its directors to accept such offer shall be accompanied by the information as prescribed in Form-35A.
CHECKLIST FOR SHARE TRANSFERS
An authorised person or company secretary or director is required to put up before the Board or Share Transfer Committee or any Committee of Directors of the Company for consideration and approval, only those cases of registration of shares transfer, which have been checked up by him and have been found to be strictly in accordance with the provisions of articles of associations and section 108 of the Companies Act, 1956. If the instrument received is deficient in any respect, the same should be returned to the person who had lodged the same with the company for making good the deficiency.
The following checklist has been designed to help an authorised person or company secretary or director in his work in processing of cases of share transfer:
1. Each column of transfer deed (Form-7B) is properly and adequately filled in.
2. Name of the company is correctly given in instrument of transfer.
3. Description of the shares, viz., equity, preference etc is correctly given.
4. Relevant share certificate (s) is/are enclosed.
5. Corresponding share Certificates number have been entered in the transfer instrument.
6. Distinctive numbers of the shares given in the instrument are same as are given in the enclosed share certificate.
7. Register of Members Folio number as given in the enclosed share certificate is correctly entered in the share transfer form.
8. Where the shares proposed to be registered in the name of the transfer are registered in the name of the transferor in the Register of Members of the company and the name(s)of the transferor(s) has/have been correctly entered in the transfer deed and is/are same as given in the enclosed share certificates.
9. Signature of the transferor agrees with one available with the company.
10. Name and address of the witness to the signature of the transferor are legibly written in the transfer deed and the witness has signed the transfer deed.
11. If the Instrument has been signed and executed by or on behalf of the transferor, whether a duly executed power of attorney has been received, and if so, the same has been checked and found in order.
12. If the Instrument has been attested, the name, address and seal of the attestator of the signature of the transferor have been legibly given in the instrument and the attestator has signed the instrument.
13. Name, occupation, address, name of the father/husband, his existing Folio No., if any and the value of share transfer stamps affixed have been legibly entered in the Instrument.
14. The transferee or the buyer has/have signed the Instrument.
15. Names of the recognized stock exchange, where dealt in, if any, have been given in the instrument.
16. The transferee or the buyer has also signed the instrument for the purpose of his/their signature as specimen in the signature card index maintained by the company for future use.
17. Share Transfer Stamp of appropriate value have been affixed on the Instrument and they have been properly cancelled by a rubber stamp or defaced otherwise. At present the stamp duty on transfer of shares is at the rate of 25 paisa w.e.f. 28.01.2004 for every Rs. 100 of value of the shares on the date of sale, or part thereof as per Article 62(a) of Schedule I to the Indian Stamp Act, 1899. If the shares are listed, the valuation of the Share Transfer Stamp is to be determined on their quoted value.
18. Whether the instrument along with the corresponding share certificate or the letter of allotment, where no share certificate have been issued, has been lodged with the company within the validity period of the instrument as per clause (b) of sub section (1A) of Section 108 of the Companies Act, 1956.
19. Where the transfer is proposed to be in the name of the minor, whether the articles of association of the company permit such registration of transfer and the shares are fully paid.
20. Whether the transferor/transferee is non resident Indian and if so, whether the deal is permitted under the Foreign Exchange Management Act, 1999 and if not, whether specific permission of the Reserve Bank of India has been obtained.
21. If applicable, whether prior approval of the Central Government has been obtained under section 108A, 108B or 108C of the Companies Act, 1956.
22. Where the shares under registration are subject to a lien of the company and is so the company has lifted the lien.
23. Where the Central Government has granted extension of time under section 108 (D) of the Act for filing an executed instrument, check, whether the instrument has been lodged with the company with in the extended period of time.
TRANSFER OF SHARES IN THE NAME OF A COMPANY
An authorised person or company secretary or director must make sure that where the shares have been purchased by a company, the instrument of transfer and the relevant share certificate must have been lodged with the company along with following documents:
- A certified copy of the MOA and AOA of the buying company
- A certified copy of the Board Resolution authorizing a director or the other person who has signed the share transfer form on behalf of the company.
- Certified copy of PAN card
- Latest shareholding pattern of the buying company
- List of director of the buying company
The company must also ensure that the memorandum of association of the buying company contain an objects clause authorizing the company to invest in shares of other companies.
TRANSFERABILITY OF SHARES OF PRODUCER COMPANY
Section 581ZD of the Companies Act, 1956 deal with transferability of shares of Producer Company. A member of the Producer Company may, after obtaining the previous approval of the Board, transfer the whole or part of his shares along with any special rights, to an active member at per value.
Within 3 months from the date of his becoming member, such person shall nominate his nominee, to whom the shares shall vest in the event of his death. The nominee shall, on the death of the member, become entitled to all the rights in the shares of the Producer Company and the Board of that company shall transfer the shares of the deceased member to his nominee.
However where such nominee is not a producer, the Board shall direct the surrender of shares together with special; rights, is any, to the Producer Company at par or such other value as may be determined by Board. Further where the Board is satisfied that any member has ceased to be a primary producer or any member has failed to retain his qualifications to be member as specified in articles, the Board shall direct the surrender of shares together with special rights, if any, to the Producer Company at par value or such other value as may be determined by the Board. However the Board shall not direct such surrender unless the member has served with a written notice and give an opportunity of being heard.
Thanks & Regards
CS Ajay Mishra