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The word ‘transfer’ is an act of the parties by which title to a property is transferred from one person (transferor) to another person (transferee).
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Shareholders are the owners of the Company and transfer of shares is a transaction resulting in a change of ownership. Rights of a shareholder to transfer his share are always subject to provisions in Articles of Association (AOA) of the company. Once the Company is incorporated, it acquires its own independent legal personality and distinct entity, and its shareholders acquire the right to hold and transfer shares.
The procedure is as under:
Private Limited Company has a power of refusal to register transfer of shares which is to be exercised by the Company within 30 days from the date on which the instrument of transfer or the intimation of transfer, as the case may be is delivered to the Company by sending a notice of the refusal along with reasons for such refusal to the transferor and the transferee.
If a company refuses or fails to register or transfer the shares then the transferee can appeal to the National Company Law Tribunal (NCLT[1]) against the refusal within a period of 30 days from the date of receipt of the notice from the Company or in case no notice has been sent by the Company, within a period of 60 days from the date on which the instrument of transfer was delivered to the Company.
There is a heavy penalty in case of default is made in complying with the provisions related to transfer of shares, the Company shall be punishable by a fine which shall not be less than Rs. 25,000/- but which may extend to Rs. 5,00,000/- and every officer of the company who is in default shall be punishable by a fine which shall not be less than Rs. 10,000/- but which may extend to Rs. 1,00,000/-.
Shares in a company can be transferred like any other moveable property in the absence of any expressed restrictions. In case you need more information on Company Share transfer or relevant laws, contact Enterslice.
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