Ankur Garg (Company Secretary and Compliance Officer) 03 September 2014
Dear Professional Colleagues,
Through this write up we shall discuss another topic which is quite frequent for secretarial department of a Company. Statutory provisions related to transfer of share one should refer the following sources:
“Relevant" Text of Section 56 and Rule 11 are reproduced below for ready reference:
Transfer and transmission of securities
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—
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.-
Main Provisions related to Transfer of Share
Note: Restriction should not be in the form of prohibition and Restriction can only be by the Articles of Association.
Basic Procedure for Transfer of Share in a 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:—
Basic Procedure for Transfer of Share in a Public Company
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:—
SECRETARIAL PRACTICE / DRAFTING
Sample Board Resolution for approval for transfer of share
The Chairperson informed the Board that Company has received 1 share transfer request, accompanied with share transfer deed duly filled in, signed and stamped along with other related documents, for approval of the transfer of shares of the Company. The matter was discussed and following resolution was passed unanimously:
“RESOLVED THAT the consent of the Board of Directors of the Company be and is hereby accorded for the transfer of equity shares as per the details given below:
Date of Registration of Transfer
No. of Equity Shares
Name of the Transferor
Ledger Folio No.
Name of the Transferee
Ledger Folio No.
“RESOLVED FURTHER THAT Mr. Rohit Bakshi, Company Secretary of the company be and is hereby authorized to make necessary endorsement on the reverse of the Share Certificate and to make entries in the register of share transfer and to do all other necessary act in this regard.to give effect to the above resolution.”
This write up is intended to start academic discussion on few significant interpretations under Companies Act, 2013. It is not intended to be a professional advice and should not be relied upon for real time professional facts. Readers are advised to refer relevant provision of law before applying or accepting any of the point mentioned above. Author accepts no responsibility whatsoever and will not be liable for any losses, claims or damages which may arise because of the contents of this write up.
I am hopeful that this write up would be of some help w.r.t. your professional working and endeavors under Companies Act, 2013. Kindly share your opinion.
CS Ankur Garg
Sept. 03, 2014
Samuel Mazowe (Executive Director Business Development/Company Secretary) 04 September 2014
Thank you for the post at least we now know how to handle such share transfer cases and lost share certificates.
MOHAMMAD.QUSROO (Practice) 05 September 2014
Thanks for your informative post.
1. I want to know, apart from this, Is private company
require to file any forms to ROC - Intimating transfer of forms?
2. Valuation of shares - NAV or DCF method ?
Rodin (Proprietor) 16 April 2015
@ Sagar: Valuation can be done by various methods such as NAV. However, for FEMA purposes, where shares are issued to non-residents, it has to be done by DCF method.
@ Qusroo: 1. There are no forms to be filed with RoC/MCA. However, the transfers will have to be shown in the next regular Annual Return filed.
Valuation: As I stated above, there is no restriction unless FEMA is involved. However, most authorities seem to be asking for DCF if it comes to their attention for any reason.
Sneha (Accountant) 16 July 2015
Dear Ankur Sir,
Thanks for the informative post and your efforts.
But i have one query. If a member of a company wants to transfer his shares but company has never issue a share certificate, what would be the solution. the company is a pvt company with paid up of 1 lakh. Will it attacrt penalty?