2. It is a voluntary act of members .
Method of transferring the ownership rights of
shares from one person to another.
TRANSFER OF SHARES
3. TRANSFER OF SHARES OF A PRIVATE LIMITED COMPANY
According to companies act , 2013 restricts the right to transfer of shares but not prohibited. It is subjected to
restrictions contained in the Articles.
Restriction is generally placed by using following two methods :
1. Right of pre – emption :
If a member wishes to sell his shares – first it shall be offered to other existing members at a price
determined – by directors / auditors / by the use of formula set out in the articles.
If no existing member is determined to acquire shares – then it can be transferred to the proposed
transferee.
2. Power of directors to refuse registration of transfer of shares :
It shall be specified in the articles and be exercised by the Board in good faith.
4. PROCEDURE
Execute the transfer deed in form SH – 4 (signed by both parties) + the Share Certificate.
Form should be duly stamped , dated by the transferor and the transferee and shall be delivered to
company – within 60 days from the date of execution.
To register the transfer : in case of partly paid up shares – company shall give notice in Form SH-5 to the
transferee and obtain NOC within 2 weeks from date of application of transfer .
Company will deliver share certificate to transferee within 1 months from receipt of transfer deed.
This procedure is defined in the section 56 of companies act, 2013 and Rule 11 of companies (share
capital and debenture) rules,2014.
5. DELIVERY OF SHARE CERTIFICATES
a) In case of transfer or transmission of securities - within 1 month of transfer deed.
b) In case of any allotment of any of its shares - within 2 months from date of allotment.
c) In case of subscribers to the memorandum - within 2 months from date of
incorporation.
IF TRANSFERDEEDIS LOST/ NOTDELIVERED
Where the transfer deed has been lost or has not reached to the company then company may
register the transfer on basis of submission of Indemnity bond by transferee and company may
asks for submission for affidavit.
6. TRANSFER OF SHARES TO A MINOR
Since a minor cannot enter into a contract or agreement (not competent to contract) except through
a natural guardian as transferee.
EFFECT OF TRANSFER OF SHARES
Transfer is not complete until the registration.
Period between transfer deed deliver to company but shares are not registered :
1) Transferor shall liable for call money however, he may recover it from transferee.
2) Dividend are declared and paid to transferor.
3) Voting rights are rest with transferor but he must vote as transferee directs.
7. DEATH OF TRANSFEROR AND TRANSFEREE BEFORE THE
DATE OF REGISTRATION
IF TRANSFEROR DIES :
1) Company has no notice of his death - then company shall register the shares in name of transferee.
2) Company has notice of his death - then company shall first referred to legal representative of
transferor.
IF TRANSFEREE DIES :
1) Company has no notice of his death - Company shall not register the shares in name of decreased
representative.
2) Company has notice of his death - Company shall transfer shares to legal representatives of
transferee with consent of transferor.
8. STATUTORY REMEDY AGAINST REFUSAL (SECTION 58)
IN CASE OF PRIVATE COMPANY :
1) If notice received - appeal to NCLT within 60 days from the date of notice .
2) If notice not received - appeal to NCLT within 90 days from intimation to company.
IN CASE OF PUBLIC COMPANY :
1) If notice received - appeal to NCLT within 30 days from the date of notice.
2) If notice not received - appeal to NCLT within 60 days from date of notice.
TRIBUNAL - Within 10 days after hearing the parties - either dismiss the case or order transfer of
shares.
9. Typesof transfers
BLANK TRANSFER :
1) when the transferor signs the transfer form without filling in the name of the transferee and the
date of execution and hands over such transfer deed along with the share certificate to the
transferee.
2) does not result into transfer of ownership unless executed and registered.
FORGED TRANSFER :
1) It is a nullity (null and void). No ownership of shares is transferred.
2) original owner of those shares can apply to get his name restored.
3) The company is liable to compensate for further sells to an innocent purchaser.
4) Company suffers losses can recover from person who did such forged transfer.
