Transfer of shares is a voluntary act. It is the phenomenon of transferring the ownership of one shareholder to another person.
Free Transferability of Securities of Public Companies
● The shares of a public company are freely transferrable.
● The board of directors or any higher official does not have the authority to refuse or hold any transfer of shares.
● The transfer should be made effective immediately by the company as soon as the notice of transfer is made.
Restrictions on Transfer of Shares
The articles of association empower the directors to reject any transfer of shares under the following grounds −
● Transfer of partly paid shares to paupers or minorities.
● The transferee is of unsound mind.
● Unpaid call against the share of transfer.
● The company has lien on shares because the transferee is in debt of the company.
Procedure for Transfer of Shares
● An instrument of transfer should be executed in the form prescribed by the government.
● Before it is signed by the transferor and before making any entry, it is given to a prescribed authority who will attest it with a stamp and the authorized date.
● The transferor and the transferee must duly sign the instrument of transfer.
● The share certificate must also be attached to it.
● A letter of allotment must be attached to the transfer form if no certificate of transfer has been issued.
● The complete transfer form along with the transfer fees should be given at the head office of the company.
● The work of registration of transfer is taken up if no objection is received by the transferor or the transferee.
● The details of transfer are entered by the secretary in the register of transfers.
● The secretary presents the instrument of transfer along with the share certificates and the register of transfers to the board of directors.
● The board of directors passes a resolution and approves the transfer.