Ordinarily shares can be transferred by a person who is the holder thereof and whose name appears in the Register of Members.
A legal representative of a deceased member, although he may not be a member, can also transfer shares. Following is the procedure of transfer of shares as laid down by section 108 of the Companies Act:
1. The instrument of transfer should be in the prescribed form (Form 7B)
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ADVERTISEMENTS:
2. Before any entry is made in the transfer form, it must be presented to the prescribed authority which is Registrar of Companies who shall stamp or otherwise endorse thereon the date on which it is so presented.
3. The transfer form, after presentation to the prescribed authority, would be executed both by die transferor and transferee of shares.
4. The transfer form would then be stamped (i.e. stamp duty of the requisite amount is affixed).
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5. The duly completed and stamped transfer form along with the relevant share certificate (allotment letter when share certificate is not issued by the company) must be delivered to the company for registration. Application for registration may be made either by the transferor or transferee of shares.
In the case of a listed company, the transfer form must be delivered to the company any time before the closure of Register of Members of the company for the first time after the date of presentation to the prescribed authority (i.e. Registrar of Companies), or within 12 months after such presentation whichever is later. In the case of other companies, the transfer form must be delivered to the company within 2 months of the date of presentation to the prescribed authority.
6. Application for transfer of shares is to be placed in the Board of Directors’ meeting (or a committee of the Board). Directors of a public company do not have any power to refuse registration of transfer of shares as shares therein are freely transferable.
The directors of a private company may refuse transfer of shares in exercise of powers given by the articles or otherwise. The company is required to send notice of the refusal to the transferee and the transferor of shares, giving reasons for such refusal within two months from the date on which the instrument of transfer was delivered to it.
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7. The company, on the approval of the transfer, shall cancel the old share certificate and issue a new one made out in the name of the transferee. The new share certificate must be ready for delivery within two months after the application for transfer is made (Sec. 113).