Transfer Of Shares

• Transfer of shares, is one of the most important right, of a member. Even Articles of Association, of a company, cannot take away this right, although it can place certain restrictions on transfer of shares.
• One of the common restriction on transfer in a private company is the pre-emption clause which states that the intending transfer, must first after the shares to the existing members of the company, so long as a member can be found to purchase them at a fair price.
• Transfer of shares, involves, two types of transaction, namely :
  -Buying of shares, i.e. transferee
  -Selling of shares, i.e. transferor

Buying Of shares

1. Shares may be brought directly, from the seller, or through a broker. Generally, shares are brought, through a broker in stock exchange, as it is not possible for buyer and seller to come in direct content, because of voluminous trading.

   Thus the first method is locate a broker.

2. Then, the buyer gives all the details to the broker, regarding :
   - the name of company of which he wants to buy shares,
   - maximum price at which he is willing to buy ,
   - Commission to be paid to broker and any advance money.
   - Number of shares to be purchased.

   All these are negotiable, as the buyer may change his opinion, on an advice given by broker.

3. Then, the broker, will hunt for the shares, the buyer wants to buy, at quoted price. The buying may take place on the trading floor of stock exchange, or at any other place. Once the order is fulfilled, broker will send a "contact rate" to the buyer, containing details and specifications.
4. Share certificates will be received by the broker, through clearing house of the stock exchange, or directly from the selling broker. This certificate will be duly accompanied by a transfer deed signed by transferor, and stamped, and authenticated by a witness.
5. When, the share certificate is delivered to the buyer; he will pay the balance money (purchase consideration) to the broker.
6. If buyer wants to retain the shares, he will then fill up the transfer deed, stamp them properly, and shall lodge the share certificates and transfer deeds with the company.
7. Finally after scrutinizing, the transfer deed, and share certificate, the company will register the name of transferee in register of members, as a member. On completion of this, the transferee acquires the status of member.
8. A buyer who does not wish to retain the shares, and wants to sell them further, may ask for a "Blank Transfer form" from the transfer, which will not have name a of transferee. This enables the buyer to further sell it. This practice is common to stock exchange.

Selling Of Shares

1. The seller may directly sell the shares, to a buyer, but here also, it is generally preferred to image services of broker.
2. An Order , i.e. "Sale order" will be placed, alongwith:-
   - Share Certificate
   - Transfer deed, and
   - Details like minimum price etc.
3. On receiving, all such things, the broker will hunt for a buyer, and strike the deal over the trading floor of stock exchange or at any other place.
4. Once the negotiations are complete, broker will hand over the share certificate, and transfer form to the buyer, and take the payment.
5. Finally, the payment will be handed over to the seller, after deducting commission.

If, seller was a member of the company, his name will be struck off, from the register of member, once; company receives the share certificates and transfer forms.