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CERTIFICATE OF SHARES AND OTHER SECURITIES

71. Limitation of time for issue of certificates.—(1) Every company shall issue certificates of
shares or other securities within thirty days after the allotment of any of its shares or other
securities and ensure delivery of the certificates to the person entitled thereto at his registered
address.

(2) Any violation of this section shall be an offence liable to a penalty of level 1 on the standard
scale.

72. Issuance of shares in book-entry form.—(1) After the commencement of this Act from a
date notified by the Commission, a company having share capital, shall have shares in book-
entry form only.

(2) Every existing company shall be required to replace its physical shares with book-entry form
in a manner as may be specified and from the date notified by the Commission, within a period
not exceeding four years from the commencement of this Act:

Provided that the Commission may notify different dates for different classes of companies:

Provided further that the Commission may, if it deems appropriate, extend the period for another
two years besides the period stated herein.

(3) Nothing contained in this section shall apply to the shares of such companies or class of
companies as may be notified by the Commission.

73. Issue of duplicate certificates.—(1) A duplicate of a certificate of shares, or other securities,

shall be issued by the company within thirty days from the date of application if the original-

(a) is proved to have been lost or destroyed, or

(b) having been defaced or mutilated or torn is surrendered to the company.

(2) The company, after making such inquiry as to the loss, destruction, defacement or mutilation
of the original, as it may deem fit to make, shall, subject to such terms and conditions, if any, as
it may consider necessary, issue the duplicate:

Provided that the company may charge fee and the actual expenses incurred on such inquiry.

(3) If the company for any reasonable cause is unable to issue duplicate certificate, it shall notify
this fact, along with the reasons within twenty days from the date of the application, to the
applicant.

(4) Any violation of this section shall be an offence liable to a penalty of level 1 on the standard
scale.

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(5) If a company with intent to defraud, issues a duplicate certificate thereof, the company shall
be punishable with fine which may extend to one hundred thousand rupees and every officer of
the company who is in default shall be punishable with imprisonment for a term which may
extend to one hundred and eighty days, or with fine which may extend to fifty thousand rupees,
or with both.

TRANSFER OF SHARES AND OTHER SECURITIES

74. Transfer of shares and other securities.—(1) An application for registration of transfer of
shares and other transferable securities along with proper instrument of transfer duly stamped
and executed by the transferor and the transferee may be made to the company either by the
transferor or the transferee, and subject to the provisions of this section, the company shall
within fifteen days after the application for the registration of the transfer of any such securities,
complete the process and—

(a) ensure delivery of the certificates to the transferee at his registered address; and
(b) enter in its register of members the name of the transferee:

Provided that in case of conversion of physical shares and other transferable securities into book-
entry form, the company shall, within ten days after an application is made for the registration of
the transfer of any shares or other securities to a central depository, register such transfer in the
name of the central depository:

Provided further that nothing in this section shall apply to any transfer of shares or other
securities pursuant to a transaction executed on the securities exchange.

(2) Where a transfer deed is lost, destroyed or mutilated before its lodgment, the company may
on an application made by the transferee and bearing the stamp required by an instrument of
transfer, register the transfer of shares or other securities if the transferee proves to the
satisfaction of the board that the transfer deed duly executed has been lost, destroyed or
mutilated:

Provided that before registering the transfer of shares or other securities, the company may
demand such indemnity as it may think fit.

(3) All references to the shares or other securities in this section, shall in case of a company not
having share capital, be deemed to be references to interest of the members in the company.

(4) Every company shall maintain at its registered office a register of transfers of shares and
other securities and such register shall be open to inspection by the members and supply of copy
thereof in the manner stated in section 124.

(5) Nothing in sub-section (1) shall prevent a company from registering as shareholder or other
securities holder a person to whom the right to any share or security of the company has been
transmitted by operation of law.

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(6) Any violation of this section shall be an offence liable to a penalty of level 2 on the standard
scale.

75. Board not to refuse transfer of shares.—The board shall not refuse to transfer any shares
or securities unless the transfer deed is, for any reason, defective or invalid:
Provided that the company shall within fifteen days or, where the transferee is a central
depository, within five days from the date on which the instrument of transfer was lodged with it
notify the defect or invalidity to the transferee who shall, after the removal of such defect or
invalidity, be entitled to re-lodge the transfer deed with the company:

Provided further that the provisions of this section shall, in relation to a private company, be
subject to such limitations and restrictions as may have been imposed by the articles of such
company.

76. Restriction on transfer of shares by the members of a private company.—(1)

Notwithstanding anything contained in section 75, a member of a private company desirous of
selling any shares held by him, shall intimate to the board of his intention through a notice.

(2) On receipt of such notice, the board shall, within a period of ten days, offer those shares for
sale to the members in proportion to their existing shareholding:

Provided that a private company may transfer or sell its shares in accordance with its articles of
association and agreement among the shareholders, if any, entered into prior to the
commencement of this Act:

Provided further that any such agreement will be valid only if it is filed with the registrar within
ninety days of the commencement of this Act.

(3) The letter of offer for sale specifying the number of shares to which the member is entitled,
price per share and specifying the time limit, within which the offer, if not accepted, be deemed
as declined, shall be dispatched to the members through registered post or courier or through
electronic mode.

(4) If the whole or any part of the shares offered is declined or is not taken, the board may offer
such shares to the other members in proportion to their shareholding.

(5) If all the members decline to accept the offer or if any shares are left over, the shares may be
sold to any other person as determined by the member, who initiated the offer.

(6) For the purpose of this section, the mechanism to determine the price of shares shall be such,
as may be specified.

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77. Notice of refusal to transfer.—(1) If a company refuses to register a transfer of any shares
or other securities, the company shall, within fifteen days after the date on which the instrument
of transfer was lodged with the company, send to the transferee notice of the refusal indicating
reasons for such refusal:

Provided that failure of the company to give notice of refusal after the expiry of the period
mentioned in this section or section 75, shall be deemed refusal of transfer.

(2) Any violation of this section shall be an offence liable to a penalty of level 2 on the standard
scale.

78. Transfer to successor-in-interest.—The shares or other securities of a deceased member

shall be transferred on application duly supported by succession certificate or by lawful award,
as the case may be, in favour of the successors to the extent of their interests and their names
shall be entered in the register of members.

79. Transfer to nominee of a deceased member.—(1) Notwithstanding anything contained in

any other law for the time being in force or in any disposition by a member of a company of his
interest represented by the shares held by him as a member of the company, a person may on
acquiring interest in a company as member, represented by shares, at any time after acquisition
of such interest deposit with the company a nomination conferring on a person the right to
protect the interest of the legal heirs in the shares of the deceased in the event of his death, as a
trustee and to facilitate the transfer of shares to the legal heirs of the deceased subject to
succession to be determined under the Islamic law of inheritance and in case of a non-Muslim
members, as per their respective law.

(2) The person nominated under this section shall, after the death of the member, be deemed as a
member of company till the shares are transferred to the legal heirs and if the deceased was a
director of the company, not being a listed company, the nominee shall also act as director of the
company to protect the interest of the legal heirs.

(3) The person to be nominated under this section shall not be a person other than the relatives of
the member, namely, a spouse, father, mother, brother, sister and son or daughter.

(4) The nomination as aforesaid, shall in no way prejudice the right of the member making the
nomination to transfer, dispose of or otherwise deal in the shares owned by him during his
lifetime and, shall have effect in respect of the shares owned by the said member on the day of
his death.

80. Appeal against refusal for registration of transfer.—(1) The transferor or transferee, or
the person who gives intimation of the transmission by operation of law, as the case may be,
aggrieved by the refusal of transfer under section 75 to 79 may appeal to the Commission within
a period of sixty days of the date of refusal.
(2) The Commission shall, provide opportunity of hearing to the parties concerned and may, by
an order in writing, direct that the transfer or transmission should be registered by the company
and the company shall give effect to the decision within fifteen days of the receipt of the order.

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(3) The Commission may, in its aforesaid order, give such incidental and consequential
directions as to the payment of costs or otherwise as it deems fit.

(4) If default is made in giving effect to the order of the Commission within the period specified
in sub-section (2), every director and officer of the company shall be liable to a penalty of level 3
on the standard scale.

COMMISSION, DISCOUNT AND PREMIUM

81. Application of premium received on issue of shares.—(1) If a company issues shares at a

premium, whether for cash or otherwise, a sum equal to the aggregate amount or the value of the
premiums on those shares must be transferred to an account, called ―the share premium
account.

(2) Where, on issuing shares, a company has transferred a sum to the share premium account, it
may use that sum to write off—

(a) the preliminary expenses of the company;

(b) the expenses of, or the commission paid or discount allowed on, any issue of shares of the
company; and

(c) in providing for the premium payable on the redemption of any redeemable preference
shares of the company.

(3) The company may also use the share premium account to issue bonus shares to its members.

82. Power to issue shares at a discount.—(l) Subject to the provisions of this section, it shall be
lawful for a company to issue shares in the company at a discount:

Provided that—
(a) the issue of shares at a discount must be authorised by special resolution passed in the
general meeting of the company;

(b) the resolution must specify the number of shares to be issued, rate of discount, not
exceeding the limits permissible under this section and price per share proposed to be
issued;

(c) in case of listed companies discount shall only be allowed if the market price is lower
than the par value of the shares for a continuous period of past ninety trading days
immediately preceding the date of announcement by the board; and

(d) the issue of shares at discount must be sanctioned by the Commission:

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Provided further that approval of the Commission shall not be required by a listed company for
issuing shares at a discount if the discounted price is not less than ninety percent of the par value;

(e) no such resolution for issuance of shares at discount shall be sanctioned by the
Commission if the offer price per share, specified in the resolution, is less than-

(i) in case of listed companies, ninety percent of volume weighted average daily closing
price of shares for ninety days prior to the announcement of discount issue; or

(ii) in case of other than listed companies, the breakup value per share based on assets
(revalued not later than 3 years) or per share value based on discounted cash flow:

Provided that the calculation arrived at, for the purpose of sub-clause (i) or (ii) of clause (e)
above, shall be certified by the statutory auditor;

(f) directors and sponsors of listed companies shall be required to subscribe their portion of
proposed issue at volume weighted average daily closing price of shares for ninety days
prior to the announcement of discount issue;

(g) not less than three years have elapsed since the date on which the company was entitled
to commence business;

(h) the share at a discount must be issued within sixty days after the date on which the issue
is sanctioned by the Commission or within such extended time as the Commission may
allow.

(2) Where a company has passed a special resolution authorising the issue of shares at a
discount, it shall apply to the Commission where applicable, for an order sanctioning the issue.
The Commission on such application may, if, having regard to all the circumstances of the case,
thinks proper so to do, make an order sanctioning the issue of shares at discount subject to such
terms and conditions as it deems fit.

(3) Issue of shares at a discount shall not be deemed to be reduction of capital.

(4) Every prospectus relating to the issue of shares, and every statement of financial position
issued by the company subsequent to the issue of shares, shall contain particulars of the discount
allowed on the issue of the shares.

(5) Any violation of this section shall be an offence liable to a penalty of level 3 on the standard
scale.

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83. Further issue of capital.—(1) Where the directors decide to increase share capital of the
company by issue of further share capital, such shares shall be offered:

(a) to persons who, at the date of the offer, are members of the company in proportion to the
existing shares held by sending a letter of offer subject to the following conditions,
namely—

(i) the shares so offered shall be strictly in proportion to the shares already held in
respective kinds and classes;

(ii) the letter of offer shall state the number of shares offered and limiting a time not
being less than fifteen days and not exceeding thirty days from the date of the offer
within which the offer, if not accepted, shall be deemed to have been declined;

(iii) in the case of a listed company any member, not interested to subscribe, may
exercise the right to renounce the shares offered to him in favour of any other
person, before the date of expiry stated in the letter of offer; and

(iv) if the whole or any part of the shares offered under this section is declined or is not
subscribed, the directors may allot such shares in such manner as they may deem fit
within a period of thirty days from the close of the offer as provided under sub-
clause (ii) above or within such extended time not exceeding thirty day with the
approval of the Commission:

Provided that a public company may reserve a certain percentage of further issue for its
employees under ―Employees Stock Option Scheme‖ to be approved by the Commission in
accordance with the procedure and on such conditions as may be specified.

(b) subject to approval of the Commission, to any person, in the case of public company on
the basis of a special resolution either for cash or for a consideration other than cash:

Provided that the value of non-cash asset, service, intellectual property shall be determined by a
valuer registered by the Commission.

(2) The letter of offer referred to in sub-clause (ii) of clause (a) of sub-section (1) duly signed by
at least two directors shall be dispatched through registered post or courier or through electronic
mode to all the existing members, ensuring that it reaches the members before the
commencement of period for the acceptance of offer.

(3) A copy of the letter of offer, referred to in sub-section (2) shall, simultaneously with the
dispatch to the members, be sent to the registrar.

(4) Notwithstanding anything contained in this section, where loan has been obtained from any
Government by a public sector company, and if that Government considers it necessary in the
public interest so to do, it may, by order, direct that such loan or any part thereof shall be

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converted into shares in that company, on such terms and conditions as appear to the
Government to be just and reasonable in the circumstances of the case even if the terms of such
loan does do not include the option for such conversion.

(5) In determining the terms and conditions of conversion under sub-section (4), the Government
shall have due regard to the financial position of the public sector company, the terms of the rate
of interest payable thereon and such other matters as it may consider necessary.

(6) Notwithstanding anything contained in this Act or any other law for the time being in force or
the memorandum and articles, where the authorised capital of a company is fully subscribed, or
the un-subscribed capital is insufficient, the same shall be deemed to have been increased to the
extent necessary for issue of shares to the Government, a scheduled bank or financial institution
in pursuance of any obligation of the company to issue shares to such scheduled bank or
financial institution.

(7) In case shares are allotted in terms of sub-section (6), the company shall be required to file
the notice of increase in share capital along with the fee prescribed for such increase with the
registrar within the period prescribed under this Act:

Provided that where default is made by a company in complying with the requirement of filing a
notice of increase in the authorised capital under this Act as well as the fee to be deposited on the
authorised capital as deemed to have been increased, the Government, scheduled bank or the
financial institution to whom shares have been issued may file notice of such increase with the
registrar and such notice shall be deemed to have been filed by the company itself and the
Government, scheduled bank or financial institution shall be entitled to recover from the
company the amount of any fee paid by it to the registrar in respect of such increase.

(8) Any violation of this section shall be an offence liable to a penalty of level 2 on the standard
scale.

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