Chp 7b Transfer Of Share

Transfer of Shares

(Sections

108 to 112) What you should know? 7.8 Right to transfer shares 7.9 Procedure of transfer of shares 7.10 When can company refuse transfer of shares 7.11 Forged transfer and blank transfer 7.12Transmission of shares 7.13 Transfer of shares under the depositories system

7.8 RIGHT TO TRANSFER SHARES Shares of a company are freely transferable subject to the restrictions contained in the Companies Act, any other statutes and the provisions of the Memorandum and Articles of Association of the company (section 82). However, in case of private company, by its very definition, there has to be restrictions on the transfer of shares. But in the case of a listed company / unlisted public company, after the enactment of Depositories Act, 1996, the securities have become freely transferable. Even the Board of Directors cannot refuse transfer of shares on any ground.

7.9 Procedure of transfer of shares SHARE TRANSFER PROCEDURE Obtain prescribed share transfer form (Form No. 7B) with the presentation date ↓ Fill up the share transfer form ↓ Get the deed signed by transferor and transferee, duly witnessed and attested ↓ Attach the share certificate with the deed and affix share transfer stamps and cancel it ↓ Deliver the deed and the certificate to the company with an application for transfer within the prescribed time ↓

The company gives notice to the transferee in the case of partly paid up shares ↓ The company board considers the application and orders for, or refuses, registration ↓ If transfer is refused, the company notifies the transferor and the transferee, Returns the documents ↓ When transfer is in order, the transferee is registered as member and the share certificate is sent to him after endorsement of title

7.10 When can company refuse transfer of shares A) In case of a public company listed or unlisted (Sec. 111A).- Shares are freely transferable; - Company cannot refuse transfer. B) In case of private company Sec. 111 -Board resolution and notice of refusal -First Remedy - Appeal to CLB -Second Remedy - Appeal for Rectification of register of members. [Sec. 111(4)].

7.11 FORGED TRANSFER AND BLANK TRANSFER Forged transfer does not confer any title. Signature of the transferor is forged. The original owner of the shares continuous to be the share holder.

Blank transfer Where a share holder signs a share transfer form without filling in the name of the transferee and hands it over along with the share certificate to the transferee thereby enabling him to deal with the shares, he is said to have made a “blank transfer”.

7.12 TRANSMISSION OF SHARES Transmission of shares may be referred to as the involuntary transfer of shares. It takes place in the event of death or insolvency of a shareholder. -Nature of Act -Consideration -Instrument of transfer -Stamp Duty -Liability of the transferor

7.13 DEPOSITORY D e p o s it o r y P a r t ic ip a n t s ( D P ) B ro k e rs C le a r in g C o r p . In v e s to rs

Is s u e r(C o m p a n y ) N BFC

F in . I n s t In s v e s to rs

S h a r e h o ld e r

Depository A depository is a company having networth of Rs. 100 crores and registered with SEBI. It provides for transfer of shares through book entry form without physical movement of scrips. It maintains accounts of the investors in electronic form and provides for settlement of trades of securities held in the depository.

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NATIONAL SECURITIES DEPOSITORY LTD. - (NSDL) & BANK - an analogy NSDL

vs.

Bank

Holds securities in accounts

Holds funds in accounts

Transfers securities between accounts

Transfers funds between accounts

Transfers without handling securities

Transfers without handling money

Safekeeping of securities

Safekeeping of money

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Dematerialisation : It is the process of conversion of physical scrips into electronic book entry form. It results in elimination of paper certificates.

NSDL

2

(depository)

5 4 Registrar

6

Depository Participant 1

3 7

Investor

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Rematerialisation : It is the process of reconversion of securities in book entry form into physical form. Fungible shares : Under a depository, shares do not have distinctive numbers. This means that shares, like currency are fungible meaning exchangeable for any other .

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7.14 NOMINATION OF SHARES /DEBENTURES/DEPOSITS (section 109A, 109B) 1. For what can nomination be made? Nomination can be made for: (i) shares (ii) debentures and (iii) fixed deposits 2. Who can make nominations? 3. Who cannot be a nominee? 4. How to make a nomination 5. Rights of nominee holder 6. When does nomination stand rescinded?