A shareholder who agrees to sell his shares and parts with them is ‘transferring’ his shares.

As per section 44 of the Companies Act, 2013 a shareholder has an absolute right to dispose of his shares unless restricted by articles. In the matter of registration of transfer of shares, articles of association are as binding on non-members as on members. As per section 56, transferring a share in physical form involves a series of steps: first an agreement to sell, then the execution of a deed of transfer, and finally the registration of the transfer. The word transfer means a whole of these steps.

An important requirement for the transfer of a security is that an instrument of transfer shall be in Form No. SH-4 and the instrument shall be duly stamped, dated, and executed by or on behalf of the transferor or transferee and is delivered to the company.

LEGAL PROVISIONS:

• A private company is required to restrict the right of its members to transfer its shares. If the article restricts the transfer of ordinary shares to the stranger by providing that no transfer is to take place as long as any other shareholder is willing to purchase the same, then a shareholder cannot transfer the shares to a stranger in contravention of the articles.
• There is free transferability of the securities of a public company but subject to any contract between the parties.
• Refusal of registration of transfer in case of a private company, then notice of refusal is to be sent to the transferor and the transferee, within 30 days from the date on which instrument of transfer or intimation was delivered to the company.
• Transferees’ right of appeal to the tribunal against the refusal by a private company within 30 days from date of receipt of notice or in case no notice received from the company then 60 days from the date on which instrument of transfer was delivered to the company.
• Transferees’ right of appeal to the tribunal against the refusal by a public company without any sufficient cause within 60 days of such refusal or where no intimation is received from the company within 90 days from date of delivery of an instrument of transfer.
• The tribunal after hearing the parties may either dismiss the appeal or direct the company to complete the transfer within 10 days of receipt of the order or direct the rectification of the register of members and direct the corporate to pay the damages sustained by the aggrieved party.

Penalty: If the tribunal’s order is contravened then the person shall be punishable with imprisonment for a term not less than one year but which may extend to three years and a fine which shall not be less than 1lakh rupees but which may extend to 5lakh rupees.

FORGED TRANSFER: If the signature of the transferor is forged on an instrument of transfer, the transfer is void as forgery is a nullity. It does not convey ownership to the transferee.

BLANK TRANSFER: Delivery of the shares certificates with the transfers executed in blank passes not the property in the shares but a title legal and equitable which will enable the holder to vest in himself with the shares without the risk of his right being defeated by the registered owner or any other person deriving title from the registered owner. A transferee of shares under a blank transfer form that is not registered in the books of the company cannot exercise any right as a shareholder against the company. Thus, a valid transfer deed that is signed by the seller is a valid instrument.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.