Right Of Transferee On Shares Pending Registration Of Transfers

Generally entries n the "Register of Members "may take some time. However, the transferee's right to dividend, Bonus Shares, Right shares etc, stands fully protected. However, the transfer deed must have been delivered to the company before the record date or book closure; otherwise this benefit would be lost. It should be noted that the transferee can get the dividend in respect of shares under transfer, only if he secures a mandate therefore from the transferor and produces the same before the company (sect 206 A)

Where dividend has already been declared, the transferee (buyer, whose name is not registered), may lodge the shares and other relevant documents, with the company, for being registered in his name, within 15 days from the date when dividend became due.

Stamp Duty On Transfer

Before the instrument of transfer is lodged with a company, it should be duly stamped, according to the Indian Stamp Act, 1899.

This is a Central Act, which all the states have adopted with modifications to suit their requirement.

In regard to share transfers, the levy of stamp duty has been allocated, by schedule VII, Entry 91, appended to the "constitution of India", and therefore only the Central Government can levy stamp duty on share transfers.

AMOUNT (entry 62, schedule I, of Indian stamp act, 1899)

The Government has prescribed a stamp duty of, Rs.0.75 for every hundred rupees (100 RS.) or part thereof the value of the share, i.e. the price at which shares were brought (commission price), and not the face value of shares under transfer.

Violation of this provision will attract penal provisions to the company, under stamp Act.

In case of gift of shares there is a necessity to mention the consideration as the shares are being transferred free of consideration. However, stamp duty thereon will have to be paid on the basis of the market value of the shares on the date of the gift.

How Is The Instrument Is To Be Stamped?

The stamp duty on the share transfer is payable by affixing on the instrument special adhesive stamps bearing the inscription "store Transfer". The stamps affixed on an investment of transfer should be cancelled before it is lodged with the company. Cancellation can be done by the transferor by signing across the stamp or in any other manner to ensure that the stamp cannot be used once again.

The stamping has to be done by transferor unless there is a contract to the contrary.