Section 56: Transfer and transmission of securities
This section is for the rules and procedures governing the transfer and transmission of securities in a company.
Penalty
(6) Where any default is made in complying with the provisions of sub-sections (1) to (5), the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.]
The section, clause by clause
What the section says
In plain terms
(1)A company shall not register a transfer of securities of the company, or the interest of a member in the company in the case of a company having no share capital, other than the transfer between persons both of whose names are entered as holders of beneficial interest in the records of a depository, unless a proper instrument of transfer, in such form as may be prescribed, duly stamped, dated and executed by or on behalf of the transferor and the transferee and specifying the name, address and occupation, if any, of the transferee has been delivered to the company by the transferor or the transferee within a period of sixty days from the date of execution, along with the certificate relating to the securities, or if no such certificate is in existence, along with the letter of allotment of securities:
A company cannot register a transfer of securities unless a proper instrument of transfer is delivered to the company within 60 days from the date of execution, along with the certificate relating to the securities, and the instrument of transfer must be duly stamped, dated, and executed by or on behalf of the transferor and the transferee.
provisoProvided that where the instrument of transfer has been lost or the instrument of transfer has not been delivered within the prescribed period, the company may register the transfer on such terms as to indemnity as the Board may think fit.
(2)Nothing in sub-section (1) shall prejudice the power of the company to register, on receipt of an intimation of transmission of any right to securities by operation of law from any person to whom such right has been transmitted.
A company can still register a transfer of securities if it receives an intimation of transmission of any right to securities by operation of law from any person to whom such right has been transmitted.
(3)Where an application is made by the transferor alone and relates to partly paid shares, the transfer shall not be registered, unless the company gives the notice of the application, in such manner as may be prescribed, to the transferee and the transferee gives no objection to the transfer within two weeks from the receipt of notice.
If the transferor applies alone for a transfer of partly paid shares, the company must give notice to the transferee, who must not object to the transfer within 2 weeks from the receipt of notice.
(4)Every company shall, unless prohibited by any provision of law or any order of Court, Tribunal or other authority, deliver the certificates of all securities allotted, transferred or transmitted—
A company must deliver certificates of all securities allotted, transferred, or transmitted within specific time periods, including 2 months from the date of incorporation, 2 months from the date of allotment, 1 month from the date of receipt of the instrument of transfer, or 6 months from the date of allotment of debenture.
(4)(a)within a period of two months from the date of incorporation, in the case of subscribers to the memorandum;
(4)(b)within a period of two months from the date of allotment, in the case of any allotment of any of its shares;
(4)(c)within a period of one month from the date of receipt by the company of the instrument of transfer under sub-section (1) or, as the case may be, of the intimation of transmission under sub- section (2), in the case of a transfer or transmission of securities;
(4)(d)within a period of six months from the date of allotment in the case of any allotment of debenture:
provisoProvided that 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.
(5)The transfer of any security or other interest of a deceased person in a company made by his legal representative shall, even if the legal representative is not a holder thereof, be valid as if he had been the holder at the time of the execution of the instrument of transfer.
A transfer of securities made by a legal representative of a deceased person is valid, even if the legal representative is not a holder of the securities.
(6)Where any default is made in complying with the provisions of sub-sections (1) to (5), the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.]
(7)Without prejudice to any liability under the Depositories Act, 1996 (22 of 1996), where any depository or depository participant, with an intention to defraud a person, has transferred shares, it shall be liable under section 447.
A depository or depository participant that transfers shares with an intention to defraud a person is liable under section 447, in addition to any liability under the Depositories Act, 1996.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. Subs. by Act 29 of 2020, s. 9, for sub-section (6) (w.e.f. 21-12-2020).
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.