What do yOU understnnd by trnnsfer of shares

‘shares’ the ownership of which is transferable. Tlus right to transfer

shares is given to the shareholders by Section 82 of the Companies’ Act. .

1956, which states that “the shares or the interest of any member in a company shall re a movable property. transferable in the manner prescribed 111 the

Articles rJf the company”. Commenting on transferability of the shares of a Company, Justice Noonan MacLeod observed. “shares are a peculiar kind of

movable property which cannot pass from hand to hand like bales of cotton. The property in the shares belongs to the registered shareholders and cannot

be transferred to another except according to the articles of the company [AIR 1923 Born. 423]. The Articles may impose

certain restrictions or lay down the manner in vhkh shares can be transferred, but it cannot take away this right of the shareholders right away.

A transfer of share is said to take place” When a registered shareholder transfers his shares voluntarily to another either by sale or otherwise”. Thus,

involuntary transfers by way of court auction or sale of forfeited shares do not fall within the purview of transfer of shares [Unity Co. Pvt. Lid r,-:,. Diamond

Sugar Mills).Shares and Del)Stories. With a view to ensuring free transferability of securities of public companies, The Depositories Act 1996 has

inserted a new section III A in the Companies Act. This section provides that the shares debentures of a public company whether listed or not shall be

freely transferable. The Board of Directors or the concerned depository does nt

have any discretion whether ur not to register the transfer of the security if the company will register the transfer as soon as it receives instrument of

transfer. If securities are in depository mode, the transfer will be effected by the depository immediately on receipt of the intimation iu appropriate form

from the participants. Under both the cases, the transferee shall be entitled to every right, including voting right associated with the security as soon as the

intimation about the transaction is received by the company or depository.

Procedure for the tenser of Shares. Ordinarily shares can be transferred by a person whose name appears in the Register of members and who is

holder thereof. As per Section 109, a legal representative of a deceased member, although not a member at the time of transfer, can also

transfer shares. Oral transfers are not recognized by the Act. Transfers. made during winding up are void unless sanctioned by the liquidator. in case of

voluntary winding up, or by the court in other types of winding up (Section 536).

In addition to complying with the provision of the Articles relating to the transfer of shares the following procedure must be followed before a company can