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

B ro k e rs N BFC S h a r e h o ld e r

C le a r in g C o r p . F in . I n s t

In v e s to rs In s v e s to rs
 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.

9
NATIONAL SECURITIES DEPOSITORY LTD. - (NSDL)
& BANK - an analogy

NSDL vs. Bank

Holds securities in accounts Holds funds in accounts

Transfers securities between Transfers funds between

accounts accounts

Transfers without handling Transfers without handling

securities 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) Depository Participant
6
5 1
3
4 7
Registrar Investor

11
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?