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Refusal By Company To Register The Transfer Of Shares

When Company has a right to refuse

The circumstances, in which a company may refuse to register the transfer of shares, are different, for company listed on stock exchange and unlisted company.

Listed Company

• Where the instrument of transfer is not properly signed or stamped or not properly executed.
• Where the transfer of security is in contravention of any law composition of
• Where the Board of Director, may change, to such on extent, because of transfer, which may affect interest of company.
• Where the transfer is prohibited by any law.

Unlisted Companies

• If partly paid up shares are being transferred and the transferee is known to be financially incapable of paying balance calls.
• If partly paid up shares are being transferred to a minor incapable of entering into a contract.
• In case due call money has not been paid by the transferor.
• When the transferor is a debtor of the company, and the company has a lien on such shares.
• If instrument is incomplete, irregular and defective, and not properly stamped.
• On other reasons, just and equitable and are in the general interests of the company.

Action By Members

Obligation of company to intimate

Where Refusal To Register Is Due To Technical Defects

In cases of technical defects, like improperly stamped, not duly executed etc, the Board of Director, have to intimate the transferee, within two months from the date of lodging the transfer deed in the prescribed form about the requirements of law which has to be completed or complied with for securing registration.

Where the transfer deed is time-banned, say it has not been delivered to the company within a period of 12 months from the date of endorsement by the prescribed authority, the instrument of transfer is to be revalidated.

For revalidating the instrument on application is to be made in form no. 7 C to the Registrar of Companies, alongwith instrument of transfer, and prescribed fees.

Where Refusal Is Due To Other Reasons
- Other reasons means
- Transfer of security is in contravention of any law, or
- Likely change in composition of Board of Directors which might be prejudicial to the interest of company

• In such cases, the company is under a legal obligation to make a reference to the company Law Board and forward copies of such reference to both the transferor and transferee.
• The transferor and transferee would be given an opportunity of making representation, if any, in writing, where after the Company Law Board would direct that the shares be either registered or not registered by the company.
• Where the order directs registration of transfer, the company is found to give effect to the registration within 10 days of the receipt of order of the Company Law Board.
• On the other hand, where the company Law Board has directed that the transfer of shares need not be registered, the company is obliged to intimate the transferor and transferee within 10 days of such direction.