TRANSFER AND TRANSMISSION OF

SECURITIES
Transferability of Shares – Section 44
• The securities (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.
• Interest here does not mean interest which is payable on debentures.
• It refers to the money interest which any member has in the company
which does not have share capital
• If there is nothing in the Articles relating to the transfer of securities
of the company, then the shares are transferable as per the general
law relating to Contracts of sale, i.e. Contract Act and Sale of Goods
Act
Transfer and Transmission

Transfer Transmission
• Transfer Buying and selling • Transfer by operation of law
• Instrument to transfer is signed for • Death
transfer of securities from the name • Lunacy
of transferor to transferee • Insolvency
• Liquidation
• Consideration in return of transfer
• No instrument of transfer but an
• Parties- transferor and transferee application is made to the company
• No consideration
• Parties- 1. original owner and 2. Legal
representative/ official assignee/
liquidator
Transfer and Transmission of Securities-
Section 56
• Whenever transfer of securities is made, company shall register this
transfers when,
• Instrument of transfer is made and it is duly stamped, dated and executed by
or on behalf of the transferor and the transferee
• It specifies the name, address and occupation, if any, of the transferee
• It is delivered to the company by the transferor or the transferee within a
period of sixty days from the date of execution
• It is accompanied by the certificate relating to the securities, or if no such
certificate is in existence, along with the letter of allotment of securities
• Instrument of transfer is not required if the transfer is between
persons both of whose names are entered as holders of beneficial
interest in the records of a depository
Section 56 contd…
• the instrument of transfer has been lost or the instrument of transfer
has not been delivered within the prescribed period, the company
may register the transfer on such terms as to indemnity as the Board
may think fit.
• (Indemnity- refers to the situation when the transfer is not genuine and the
company is later asked to make good the loss that has incurred to the genuine
owner, then the company can recover the loss from this transferee)
• Where application to register the transfer has been made by
transferor alone and the shares are partly paid, it is the duty of the
company to send a notice to the transferee to object to this transfer
within two weeks.
• If the transferee gives no objection to the transfer within two weeks from the
receipt of notice, the company can register the transfer
Section 56 contd…
• There is no restriction on the company to register the transmission of securities in
the name of person to whom they have been transmitted by the operation of law
• Delivery of certificates for securities allotted, transferred or transmitted:
(a) within a period of two months from the date of incorporation, in the case of
subscribers to the memorandum;
(b) within a period of two months from the date of allotment, in the case of any
allotment of any of its shares;
(c) within a period of one month from the date of receipt by the company of the
instrument of transfer under sub-section (1) or, as the case may be, of the intimation of
transmission under sub-section (2), in the case of a transfer or transmission of securities;
(d) within a period of six months from the date of allotment in the case of any
allotment of debenture

• In case of securities with the depository- immediate allotment

Section 56 contd…
• If the securities have devolved upon a person by virtue of death of
original owner, the legal representative can transfer these securities
validly even if he is not the holder. It shall be deemed that he was the
holder at the time of the execution of the instrument of transfer
• Where any default is made in complying with the provisions this
Section:
• the company shall be punishable with fine which shall not be less than
twenty-five thousand rupees but which may extend to five lakh rupees and
• every officer of the company who is in default shall be punishable with fine
which shall not be less than ten thousand rupees but which may extend to
one lakh rupees.
Refusal of Registration and Appeal against
Refusal- Section 58
• Whenever the securities get transferred or transmitted, the company is
supposed to register this transfer or transmission.
• PRIVATE COMPANY- it refuses to register the transfer of, or the
transmission by operation of law of the right to, any securities or interest of
a member in the company:
• It shall send notice of the refusal to the transferor and the transferee or to the
person giving intimation of such transmission within thirty days from the date on
which the instrument of transfer, or the intimation of such transmission
• The transferee may appeal to the Tribunal against the refusal within a period of thirty
days from the date of receipt of the notice or in case no notice has been sent by the
company, within a period of sixty days from the date on which the instrument of
transfer or the intimation of transmission, as the case may be, was delivered to the
company (Sub-section 3)
Section 59 contd…

• PUBLIC COMPANY- securities or other interest of any member in a

public company shall be freely transferable- and transfer of securities
shall be enforceable as a contract
• It can refuse to register if it has a sufficient cause
• It can refuse within a period of thirty days from the date on which the
instrument of transfer or the intimation of transmission
• the transferee may, within a period of sixty days of such refusal or where no
intimation has been received from the company, within ninety days of the
delivery of the instrument of transfer or intimation of transmission, appeal to
the Tribunal
Section 59 contd…
• Options with tribunal: it may after hearing the parties:
• direct that the transfer or transmission shall be registered by the company
and the company shall comply with such order within a period of ten days of
the receipt of the order; or
• direct rectification of the register and also direct the company to pay
damages, if any, sustained by any party aggrieved.
• Punishment for contravening the order of the Tribunal:
• Person doing so shall be punishable with imprisonment for a term which shall
not be less than one year but which may extend to three years and with fine
which shall not be less than one lakh rupees but which may extend to five
lakh rupees.