The shares or debentures or other interest of any member in a Company shall be movable property transferable in the manner provided by the articles of the Company. [Section 44]
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, duly stamped, dated and executed by or on behalf of the transferor and the transferee. [Section 56]
- A proper duly stamped, dated and executed in Form No. SH-4 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
- If the instrument of transfer has been lost or the instrument of transfer has not been delivered within 60 days of execution, the company may register the transfer on such terms as to indemnity as the Board may think fit. [Proviso to Section 56(1)]
- 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 Form SH-5 to the transferee and the transferee gives no objection to the transfer within two weeks from the receipt of notice. [Section 56(3) read with rule 11(3) of the Companies (Share Capital and Debentures) Rules, 2014]
Following Procedure is to be followed
- Execution and Delivery of Instrument of Transfer [Section 56(1) and Rule 11(1) of the Companies (Share Capital and Debentures) Rules, 2014]
- Both transferor and transferee or anyone on their behalf shall execute instrument of transfer of securities in Form SH-4.
- Stamps of appropriate value must be affixed on the instrument and cancelled properly.
- Transferor or Transferee shall deliver the instrument of transfer to the Company within 60 days from the date of execution along with Share Certificate or Letter of Allotment, as the case may be.
- Convene a Meeting of Board of Directors [As per section 56, 173 & SS-1]
- Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
- Notice shall be sent to the transferee as well for obtaining his consent in case of transfer of partly paid securities.
- Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
- Hold a meeting of Board of Directors of the Company and pass the Board Resolution to approve transfer of securities.
- Board shall obtain necessary indemnity from the transferor in case of mismatch of the signatures.
- Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]
- Make Necessary Entries in the Registers [Section 88(1) and Rule 5 of the Companies (Management and Administration) Rules, 2014]
Company shall make necessary entries in the Register of Members i.e. Form MGT-1 or in the Register of Debenture holders or other securities holder i.e. Form MGT-2, within 7 days of the Board Meeting in which transfer was approved.
- Deliver the Certificate of Securities [Section 56(4)]
Company shall endorse the details of transfer on the back of Certificate of Securities i.e. Form SH-1 (in case of Shares only) and deliver the same to the transferee within a period of 1 month from the date of receipt of the instrument of transfer by the company.