Share transfer

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Monika Agarwal (Querist)
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11 June 2012 Mr A sells his shares held in a pvt ltd co to Mr B and hands over the share certificates along with a blank trf deed signed by him i.e transferor to Mr B. Mr B in turn sells the shares & hands over the same blank trf deed with share cert to Mr C. Subsequently Mr C sells the same to Mr D. The whereabouts of Mr A & Mr B are not known to Mr D.

Mr D now lodges the share certificates along with the same trf deed signed by Mr A with the company for transfer of the shares & endorsement of share certificates in his favour.
Is the process valid?

Meanwhile if Mr A lodges request with the co.for duplicate share certificates on the ground of loss of original share certificates. What are the options available with Mr D to prove that he has purchased the shares and paid for the same.

Ajay Mishra

Ajay Mishra (Expert)
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11 June 2012 Hi

If Mr. A wanted to transfer his shares to Mr. B then he will follow the following procedure for giving effect to transfer:

Procedure for transfer of shares of private company
Generally articles contain the detailed provisions as regards the procedure for transfer of shares. Usually following steps shall be followed by a private company to give effect to the transfer of shares:—
(i) Transferor should give a notice in writing for his intention to transfer his share to the company.
(ii) The company in turn should notify to other members as regards the availability of shares and the price at which such share would be available to them.
(iii) Such price is generally determined by the directors or the auditors of the company.
(iv) The company should also intimate to the members, the time limit within which they should communicate their option to purchase shares on transfer.
If none of the members comes forward to purchase shares then the shares can be transferred to an outsider and the company will have no option, other than to accept the transfer.
It is to be noted that any transfer of shares to an outsider without complying with the procedure as specified in the articles for effecting transfer of shares will not be operative against the company. Even in the case where the procedure prescribed by the articles was not followed and such failure was not due to any fault on the part of the selling shareholder, the transfer to an outsider was held not to be effective.
Transfer of shares without consent of holder of shares and without prior sanction of board of directors as required under articles of association of a private company concerned could not be held to be valid. [John Tinson Co. (P) Ltd. v Mrs. Surjeet Malhan (1997) 88 Comp Cas 750 (SC)].

Regards

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