Recap Reduction of capital Reduction of capital and objecting creditors. Liabilities of members in respect of reduced shares. Prohibition on purchase of shares and its exception. Purchase of its own shares by listed companies.

Transfer and Transmission of Shares

Concept of Transfer /Transmission of Shares & Debentures: The word “transfer” is an act of the parties by which title to property is transferred from one person to another. (Person also includes legal person e.g. company, body corporate, etc.) The word “transmission” is referred to transfer of title to parties by operation of law. Transfer of shares means a voluntary passing of property in certain shares from one person to another by presenting to the company a duly stamped and executed instrument of transfer, by or on behalf of the transferor and transferee containing their names, addresses and occupations along with the share certificates relating to the shares to be transferred, whereas transmission on the other hand, involves the passing of the property in shares by operation of law on the happening of such events such as death, insolvency or lunacy of a share-holder/debenture-holder, etc

Concept of Transfer /Transmission of Shares & Debentures: A share transfer is a procedure by which an existing shareholders transfers his/her share(s) or/and debenture(s) to an existing shareholder(s), or to any one else depending upon the transaction and circumstances of the case. Under the law anyone has a right to transfer his / her share(s) to any existing one or anyone else; however a private company may by its articles of association (AOA) restrict the right to transfer the company’s shares .

Provisions of Law Relating To Transfer & Transmission of Shares or/and Debentures: Sections 74 to 81 of the Ordinance deal with issues governing the transfer and transmission of shares or / and debentures.

Limitation on Transfer of Shares and Debentures Every company has to transfer the shares within forty five days of application. The company shall within 30 days or where the transferee is a central depositary company within five days from the date on which the instrument of transfer is lodged with the company, will notify the defect or invalidity to the transferee who shall after removing the identified defect shall re-lodge the transfer deed with the company. These conditions, in relation to a private limited company shall be subject to such limitations and restrictions as imposed by its AOA, if any. The company shall not register transfer of shares unless proper instrument of transfer, duly stamped and executed by the transferor and the transferee has been delivered to the company.

Stepwise Procedure for Transfer of Shares: Following procedure shall be adopted for transfer of shares: Lodgment of Transfer Deed: An application for transfer of shares along with duly filled in transfer deed and share certificate in original is lodged at registered office of the company or the share registrar office by the transferee, or the transferor. Normally, a receipt is issued. Note:- In case transfer deed or share certificate is lost, necessary affidavit and any other evidence supporting the fact is provided to the company.

Stepwise Procedure for Transfer of Shares: Checking and Verification: The company checks and verifies the transfer deed and share certificate. The company is required to register a transfer of shares only in case proper instrument of transfer duly stamped in accordance with the Stamp Act, witnessed, executed by the transferor and the transferee and is delivered along with the certificate(s). Notice: In case the articles of the company provided any other condition or there are any shortcomings/deficiencies as provided in the law and AOA of the company, the company issues a notice to the presenter regarding such transfer for further verification.

Stepwise Procedure for Transfer of Shares: Approval: Approval for transfer of shares is sought from the board of directors or committee of directors as the case may be.  Register of members: Necessary entries are made for entering the name of transferor in the register and recording transfer against the name of transferor.

Stepwise Procedure for Transfer of Shares: Share Certificate: Entry is made in the “Memorandum of Transfer” column on the reverse of the share certificate thereby making the transferee as shareholder.   Delivery of Share Certificate: Share certificate is sent to the transferee through registered post or well reputed courier service and acknowledgement of receipt is kept on record.

Stepwise Procedure for Transmission of Shares: Following procedure shall be adopted for transmission of shares: Intimation: As soon as intimation of death, lunacy, insolvency of a member or any direction/order of the court is received, the fact is required to be recorded in the relevant register of the company.   Death Certificate: In case of death, the legal heir(s) is required to produce death certificate issued by relevant authorities.

Stepwise Procedure for Transmission of Shares: Application for transmission of shares: The legal heir(s) or successors are required to make application to the company for transmission of shares duly supported with the documentary evidence showing nomination or lawful award of applied property to him.   Approval: Approval for transmission of shares is sought from the board of directors or committee of directors as the case may be.

Stepwise Procedure for Transmission of Shares: Register of Members: Necessary entries are made for entering the name of successors in the register and recording transfer against the name of deceased.   Share Certificate: Entry is made in the “Memorandum of Transfer” column on the reverse of the share certificate thereby making the successor as shareholder. Delivery of Share Certificate: Share Certificate is sent to the successor and acknowledgement of receipt is kept on record.

Stepwise Procedure for Transmission of Shares: Register of Members: Necessary entries are made for entering the name of successors in the register and recording transfer against the name of deceased.   Share Certificate: Entry is made in the “Memorandum of Transfer” column on the reverse of the share certificate thereby making the successor as shareholder. Delivery of Share Certificate: Share Certificate is sent to the successor and acknowledgement of receipt is kept on record.

Provisions Regarding Transfer of Shares (Section-76) The mode of transferring shares provided by articles. An application for the registration of transfer of shares made by transferor or transferee. Proper instrument of transfer is used. In case of lost of transfer deed the director may register the transfer with indemnity as they think fit.

Shareholder has right to transfer shares unless the article provides otherwise. In the absence of any restriction in the article, the company has no inherent power to refuse bona-fide transfer of share in the company. Share certificates should be ready for delivery within 45 days.

Refusal To Transfer (Section-77&78) The director can not refuse to transfer the shares unless the transfer deed is invalid. If directors refuse registration, they must notify this fact to the applicant within thirty days or where the transferee is a central depository, within five days from the date on which the instrument of transfer was lodges with company.

In case of private company, if any restriction is imposed on transfer of share by the article then the transfer of shares shall be subject to those restriction . In case of default, company and officers shall be liable to a fine not exceeding twenty thousand and further fine not exceeding one thousand for everyday for which default continues.

Appeal Against Refusal For Registration of Transfer (Section-78A) A person may appeal to the commission against any refusal to register transfer. Appeal shall be made within two months of the receipt of the notice of refusal or expiry of thirty days period for registration.

The commission may direct that the transfer and transmission shall be register by the company or it need not be registered. The company shall give effect to the decision within fifteen days of receipt of order. In case of default, every director or officer of the company shall be punishable with fine which may extend to five hundred for every day during which default continues.

Transfer of shares to Successor in interest (Section-79) The transfer of shares from a deceased member to his lawful nominee or successor in interest shall be made on application by such nominee or successor dully supported by a document evidencing nomination or lawful award of the relevant property to such nominee or successor and the nominee or successor shall be entered as member.

Transfer to Nominee of a Deceased Member (Section-80) Deposit nomination A person may on acquiring interest in a company as member at any time after acquisition of such interest deposit with the company a nomination conferring on one or more persons the right to acquire the interest in the shares specified in the event of death. Specify the extent of right where the member nominates more than one person, he shall specify in the nomination the extent of right to conferred upon each of nominee.

Nominee excludes all others Where any nomination, duly made and deposited with the company to confer upon any person the right to receive the whole or any divisible part of interest, the said person shall, on the death of member, become entitled to the exclusion of all other persons, to become the holder of shares. And on receipt of proof of the death of the member, the transmission of the said shares shall be registered in favour of the nominee to the extent of his interests unless

Nominee excludes all others Such nomination is at any time varied by another nomination made and deposited before the death of the member in like manner or expressly cancelled by notice in writing to the company such nomination at any time become invalid by reason of the happening of some contingency specified therein. If the said person predeceases the member, the nomination shall become void and of no effect.

The Title of Deceased Shareholder is Transferred to: The title of share of deceased shareholder is transferred to: His lawful successor on application made by successor. Nominee of deceased member on receipt of proof of death of the member with share certificate. Only the spouse, father, mother, brother, sister and son or daughter( real, step or adopted) can be nominated.

Transfer of the Share by Nominee or Legal Representative (Section-81) Transfer of the share by nominee or legal representative shall be valid if he had been a member at the time of execution of the instrument of transfer.

Transmission of Shares Transmission is the passing of title or property in shares by operation of law on the happening of such events as death, insolvency or lunacy of shareholder.

Differences Between Transfer and Transmission of Shares Passing of title or property and deliberate act of the shareholder. Passing of title or property in shares by operation of law on the happening of certain events. Takes place when a member transfer his shares to some other person on sale, gift, during his life time. Takes place on the death, insolvency or lunacy of a shareholder. In case of transfer the title to holding and the right to transfer passes to transferee. The title to shares and the right to transfer them passes to the executors or administrators of deceased to official assignees of an insolvent or to guardian of a lunatic. A duly stamped and properly executed instrument of transfer has to be lodged with company for registration. No instrument of transfer is needed. Only probate, letter of both administration and succession certificate or court order is to be produced by legal representatives.

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