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TRANSFER AND TRANSMISSION OF SECURITIES (Companies Act, 2013) | AishMGhrana

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TRANSFER AND TRANSMISSION OF SECURITIES (Companies Act, 2013)

Posted on October 1, 2013 | 1 Comment

2 V otes Free transferability of share is one essential condition for Company form of business, subject to some restrictions under priv ate companies. New Act, deals with substantially . T RANSFER AND T RANSMISSION OF SECURIT IES (SECT ION 56): A company shall register a transfer of securities or interest of members only when such a proper instrument of transfer; duly stamped, dated and ex ecuted by or on behalf of the transferor and transferee and specify ing the name, address and occupation has been deliv ered to the company by either party within a period of six ty day s from date of ex ecution, along with the certificate of security or the letter of allotment of securities. Where, instrument of transfer has been lost or has not been deliv ered, the company may register the transfer on an indemnity bond. On receipt of intimation, a company has power to register transmission of any right to securities by operation of law from any person to whom such right has been transmitted. Where an application is made by transferor alone and relates to partly paid shares, the transfer shall be registered by the company only after giv ing notice of the application to the transferee, and transferee giv es no objection to the transfer within two weeks from the receipt of notice. The transfer of any security or other interest of a deceased person in a company made by his legal representativ e shall be v alid as if he had been the holder at the time of the ex ecution of the instrument of transfer. Deliv ery of certificate of securities: Ev ery company shall, unless prohibited by any prov ision of law or any order of court, Tribunal or other authority , deliv er the certificate of all securities allotted, transferred or transmitted (a) Within a period of two months from the date of incorporation, in case of subscribers to the Follow

memorandum;

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TRANSFER AND TRANSMISSION OF SECURITIES (Companies Act, 2013) | AishMGhrana

(b) Within a period of two months from the date of allotment, in case of any allotment of any of its shares;

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(c) Within a period of one month from the date receipt by the company of the instrument of transfer toof your Inbox. or intimation of transmission; and Join 606 other followers (d) Within a period of six month from the date of allotment in case of any allotment of debentures.

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Howev er, where the securities are dealt with in a depository ; the company shall intimate the details of allotment of securities to depository immediately on allotment of such securities. Penal prov ision:
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Where any default is made under this section, the company shall be punishable with fine which shall not be less than twenty -fiv e thousand rupees but which may ex tend to fiv e lakh rupees and ev ery 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 ex tend to one lakh rupees. Without prejudice to any liability under the Depositories Act, 1 996, where any depository or depository participant, with an intention to defraud a person, has transferred shares, it shall be liable under section 447 . Punishm ent for personation of shareholder (Section 57 ): If any person deceitfully personates as an owner of any security or interest in a company , or of any share warrant or coupon issued in pursuance of this Act, and thereby obtains or attempts to obtain any such security or interest or any such share warrant or coupon, or receiv es or attempts to receiv e any money due to any such owner, he shall be punishable with imprisonment for a term which shall not be less than one y ear but which may ex tend to three y ears and with fine which shall not be less than one lakh rupees but which may ex tend to fiv e lakh rupees. Simply , any person, who deceitfully represent himself as holder of any security or interest in a company shall be punishable with imprisonment and with fine. Y es, minimum fine is one lakh rupees. REFUSAL OF REGIST RAT ION AND APPEAL (SECT ION 58): The securities and other interest of any member in a public company shall be freely transferable. Any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract. This means any shareholders agreement restricting transferability of shares in a public company shall be a priv ate contract among contracting members. If a priv ate company limited by shares refuses to register the transfer or transmission of any securities or interest of a member in the company , it shall, send a notice of the refusal to transferor, transferee or
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TRANSFER AND TRANSMISSION OF SECURITIES (Companies Act, 2013) | AishMGhrana

person sending intimation giv ing reason for such refusal. This intimation shall be send within a period of thirty day s from the date of receipt of instrument of transfer or intimidation for transmission. The transferee may appeal to the tribunal against the refusal within a period of thirty day s from the date of receipt of the notice. Where no notice has been send by the company , transferee may appeal to the tribunal within a period of six ty day s from the date on which the instrument of transfer or intimation of transmission was deliv ered to the company . If a public company without sufficient cause refuses to register the transfer of securities within a period of thirty day s from the date on which the instrument of transfer or the intimation of transmission, as the case may be, is deliv ered to the company , the transferee may , within a period of six ty day s of such refusal or where no intimation has been receiv ed from the company , within ninety day s of the deliv ery of the instrument of transfer or intimation of transmission, appeal to the Tribunal. The tribunal after hearing the parties, may either dismiss the appeal or by order (a) Direct that the transfer or transmission shall be registered by the company and company shall comply with such order within a period of ten day s of receipt of the order; or (b) Direct rectification of the register and also direct the company to pay damages sustained by any party . If a person contrav enes the order of the Tribunal under this section, he shall be punishable with imprisonment for a term which shall not be less than one y ear but which may ex tend to three y ears and with fine which shall not be less than one lakh rupees but which may ex tend to fiv e lakh rupees. RECT IFICAT ION OF REGIST ER OF MEMBERS (SECT ION 59): The person aggriev ed, or any member of the company , or the company may appeal to the Tribunal, or to a competent court outside India, specified by the Central Gov ernment by notification, in respect of foreign members or debentures holders residing outside India, for rectification of the register in following circumstances (i) If the name of any person is without sufficient cause entered in the register of members of a

company ; or (ii) If the name of any person after hav ing been entered in the register is without sufficient cause

omitted; or (iii) If a default is made or unnecessary delay takes place in entering in the register, the fact of any

person hav ing become or ceased to be a member. The tribunal after hearing the parties, may either dismiss the appeal or by order

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(a) Direct that the transfer or transmission shall be registered by the company within a period of ten day s of receipt of the order; or (b) Direct rectification of the register or record of depository and may , in case of register, also direct the company to pay damages sustained by party aggriev ed. The prov isions of this section shall not restrict the right of a holder of securities, to transfer such securities and any person acquiring such securities shall be entitled to v oting rights unless the v oting rights hav e been suspended by an order of the Tribunal. Where the transfer of securities is in contrav ention of any of the prov isions of the Securities Contracts (Regulation) Act, 1 956, the Securities and Ex change Board of India Act, 1 992 or this Act or any other law for the time being in force, the Tribunal may , on an application made by the depository , company , depository participant, the holder of the securities or the Securities and Ex change Board, direct any company or a depository to set right the contrav ention and rectify its register or records concerned. If any default is made in comply ing with the order of the Tribunal under this section, the company shall be punishable with fine which shall not be less than one lakh rupees but which may ex tend to fiv e lakh rupees and ev ery officer of the company who is in default shall be punishable with imprisonment for a term which may ex tend to one y ear or with fine which shall not be less than one lakh rupees but which may ex tend to three lakh rupees, or with both. Power to nom inate (Section 7 2): Ev ery holder of securities of a company may at any time nominate any person to whom his securities shall v est in the ev ent of death of that holder. In case of joint holding, the joint holders may together nominate any person to whom all the rights in the securities shall v est in the ev ent of death of all the joint holders. In respect of the securities of a company , where a nomination made purports to confer on any person the right to v est the securities of the company , the nominee shall, on the death of the holder of securities or, as the case may be, on the death of the joint holders, become entitled to all the rights in the securities, of the holder or, as the case may be, of all the joint holders, in relation to such securities, to the ex clusion of all other persons, unless the nomination is v aried or cancelled in the prescribed manner. This is v ery important because usually nominee hold property in trust for benefit of all other legal heirs. Where the nominee is a minor, it shall be lawful for the holder of the securities, making the nomination to appoint any person to become entitled to the securities of the company , in the ev ent of the death of the nominee during his minority . Please note: I w elcome your comments and feedback. This blog post is not a professional advice.
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TRANSFER AND TRANSMISSION OF SECURITIES (Companies Act, 2013) | AishMGhrana

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This entry was posted in CorpLaw, Gov ernance and Responsibility , Laws and tagged Companies Act 201 3, Companies Bill 201 2, Companies Bill 201 3, CorpGov , CorpLaw, Corporate Gov ernance, Corporate Law, Depository , Free transferability , India, Legal Reforms, Ministry of corporate affairs, Nomination, Personation of member, Rectification of register, Reforms, Register of Member, Restriction of securities transfer, SEBI, Securities, Shares, transfer of securities, Transfer of shares, transmission of securities,
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