Chapter VII
APPLICATION, ALLOTMENT, CALLS,
TRANSFER/TRANSMISSIONS AND FORFEITURE
A. APPLICATION, ALLOTMENT, CALLS
[Topic 160 to 164]
B. TRANSFER/TRANSMISSION [Topic
165 to 180]
C. FORFEITURE [Topic 181 to 183]
A.
Application, Allotment, Calls
(Topic 160 to Topic 164)
Topic 160
DO YOU WISH TO APPLY FOR SHARES OR
DEBENTURES?
1. Fill up the
application form prescribed by the company complying with all the conditions
laid down for the same including the application money to be remitted; sign the
same and in case of a joint application, get the same signed by all the
applicants.
2. If the shares
are to be applied for on behalf of others as nominee or trustee, do not mention
in the application, the name of the appointer or the trust. [Section 153]
3. In the
aforesaid case make a declaration to the Public Trustee within sixty days from
the date you are allotted the shares you have applied for in case the amount of
shares or debentures applied for exceeds the limits laid down in Section 153B.
4. Such
declaration must be in Form 1 of the Trustees (Declaration of Holdings of
Shares and Debentures) Rules, 1964.
5. If you are non‑resident
Indian or any overseas corporate body where the non‑resident interest is
at least 60%, comply with the Exchange Regulations of both the countries and
for this please refer to Chapter 10 of Foreign Exchange Management Act, 1999.
6. If you are a company, verify:
(a) that your object clause permits you to take up shares or
debentures and get the name of a director authorised by a Board Meeting of your
company so that he may sign his name as an applicant on behalf of the company.
[Section 187];
(b) that you are not applying for shares of your holding company
in contravention of section 42;
(c) that you are not purchasing your own shares in contravention
of Section 77 except in case of buy‑back of shares under section 77A;
(d) that by applying for shares of a private company, you are not
making that company a section 43A Public company, unless you intend to do so;
(e) that you are complying with the provisions of section 292 and
in case you are a Public company or its subsidiary, the provisions of section
372A also.
7. Only a
"person" can become member of a company; so the application should
not be made in the name of a partnership firm, proprietary trade name, Hindu
Undivided Family or an unincorporated association.
8. A minor, or a
person of unsound mind, or an insolvent or a bankrupt can apply for fully paid
shares provided they are so made under the representations of their natural or
legal guardian and provided further that the Articles of Association of the
concerned company do not prohibit it.
9. Never apply in a fictitious name. [Section 68A]
10. If your
company is a listed company and it wants to apply for equity shares of another
listed company then follow the provisions of the SEBI (Substantial Acquisition
of Shares and Takeovers) Regulation, 1997.
Topic 161
DO YOU WISH TO ALLOT SHARES OR DEBENTURES?
1. Scrutinise
applications vide Topics 304 to 309 and 317 for shares or debentures and place
them before the Board of Directors or a committee of the Board formed for the
purpose.
2. In the absence
of any application for shares, there should be some written agreement like
vendor's agreement, collaborator's agreement etc., in writing, agreeing to take
up the shares. [Section 41(2)]
3. Where shares
or debentures are issued in pursuance of a prospectus issued generally then do
not make the allotment before the beginning of the fifth day after the
prospectus is so issued. [Section 72(1)(a)]
4. If any public
notice is given by any person responsible under Section 62 which has the effect
of excluding, limiting or diminishing his responsibility, then do not make the
allotment before the beginning of the fifth day after such public notice is
first given. [Section 72(1)(a), Proviso]
5. Please keep in
mind that although the validity of an allotment will not be affected by any
contravention of the forgoing requirements, but in the event of any such
contravention, the company and every officer of the company who is in default
will be punishable with fine upto Rs. 50,000/‑.[Section 72(3)]
6. Convene a
Board Meeting after giving notice to all the directors of the company as per
section 286 of the Act and pass a resolution in the said Board Meeting
allotting the shares to the applicants approved.
7. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of Rs. 1,000/‑.[Section 286(2)]
8. Send the intimation to the allottees by way of
allotment letters.
9. Such letters
should be properly stamped as per the Indian Stamp Ace or relevant State Act
and the Indian Stamp Act Notifications of the respective States.
10. In West Bengal, the Stamp Duty for this purpose is
0.20 P. per letter of allotment.
11. If the shares
of your company are listed on a Stock Exchange, issue the letters of allotment
within six weeks of the date of closure of the subscription list or such
extended period as may be approved by the said Stock Exchange. [Clause 23(j) of
the Standard Listing Agreement]
12. If the shares
of your company are listed on a Stock Exchange, then you have to comply with
the following conditions regarding letters of allotment:
(a) They should be issued simultaneously and that in the event of
it being impossible to issue letters of regret, at the same time a notice to
that effect will be inserted in the press so that it will appear on the morning
after the letters of allotment have been posted;
(b) The
letters of right should be issued simultaneously;
(c) They should be serially numbered, printed on a good quality
paper and examined and signed by a responsible officer of your company and
wherever possible, they will contain the distinctive numbers of the securities
to which they relate;
(d) They should contain a provision for splitting and when so
required by the Exchange, the form of renunciation should be printed on the
back of or attached to the allotment letters;
(e) They should state how the next payment of dividend will be
calculated [Clause 1 of Standard Listing Agreement];
(f) They are issued in market units of trading if your company is
a listed company. [Clause 4(a) of the Standard Listing Agreement]
13. File return of
allotment in Form No. 2 and particulars of contract, and where shares have been
allotted for other than cash without any contract in writing in Form No. 3,
within thirty days from the date of allotment, with necessary details and
enclosures [Section 75(1) and (2)], with the concerned Registrar of Companies
after paying the requisite fee as prescribed under Schedule X to the Companies
Act, 1956, either in cash, or treasury challan. [Rule 22]
14. Do not show in
the aforesaid return any shares as having been allotted for cash if cash has
not actually been received in respect of such allotment. [Section 75(1)(a)
proviso]
15. Please keep in
mind that if default is made in complying with the aforesaid requirements,
every officer of the company wbo is in default will be punishable with fine
upto Rs. 5,000/- for every day during which the default continues. [Section
75(4)]
16. Please also
keep in mind that in case of contravention of the requirement mentioned in item
11A above, every such officer and every promoter of the company who is guilty
of the contravention will be punishable with fine upto Rs. 50,000/‑.
[Section 75(4) proviso]
17. The concerned
Registrar of CompanieS4 may extend this period of thirty days if he is
satisfied about the inadequacy of this period on an applicationt made by the
company. [Section 75(3)]
18. No Return of
Allotment is necessary in case of allotment of shares which were forfeited for
non‑payment of calls and for shares subscribed for in the Memorandum of
Association itself by the signatories thereto. [Section 75(5)]
19. While filing a
Return of Allotment in Form No. 2, see that a certificate signed by director,
managing director, manager or secretary to the effect that the conditions, if
any, imposed by the Controller of Capital Issues in the order consenting to
the issue if the issue is made before 29th May, 1992 accompanies the return.
This is not required where the issue is made after the aforesaid date irrespective
of the amount involved.
20. In case of a public company:
(a) having a share capital, which does not issue a Prospectus on
or with reference to its formation, or which has issued such a Prospectus but
has not proceeded to allot any of the shares offered to the public for
subscription, it cannot allot any of its shares or debentures unless at least
three days before the first allotment of either shares or debentures, there has
been delivered to the concerned Registrar of Compapanies for registration a
statement in lieu of Prospectus in accordance with Section 70;
(b) where a Prospectus is issued, the provisions of section 69
regarding minimum subscription should be complied with.
21. Keep in mind
that a private company which is a subsidiary of a public company will be
treated as a public company. [Section 3(1)(iv)(c) ]
22. In case of
listing of shares or debentures of a public company with a recognised Stock
Exchange, the provisions of Section 73 should be complied with before making
any allotment provided that if the issue of shares is less than Rs. 39 crores
but not less than Rs. 30 lakhs your company can also have its securities listed
on the Over The Counter Exchange of India as per Topic 357 or 358 as the case
may be.
23. For allotting
shares to non‑residents Indians or to overseas corporate bodies
controlled by non‑resident Indians or to foreign nationals or bodies
corporate obtain permission of the Reserve Bank of India by making an
application under the Foreign Exchange Management Act, 1999 wherever required.
24. For
allotting shares to non‑resident Indian or to overseas corporate bodies
pred ominantly owned by non‑resident Indians on non‑repatriation
basis, special permission of Reserve Bank of India is not required but your
company should file a declaration with Reserve Bank of India within ninety days
of investment.
25. In calculating
the fifth day mentioned in items 3 and 4 disregard any intervening day which is
a public holiday under the Negotiable Instruments Act, 1881 and when such fifth
day itself is a public holiday as aforesaid then regard the first day
thereafter which is not such a holiday, as such fifth day. [Section 74]
26. Keep in mind
that on and from 31st October, 1998 your company should transfer to the
Investor Education and Protection Fund established under Se6tion 205C all the
application moneys received by your company for allotment of your company's
shares or debentures and due for refund alongwith interest accrued thereon
remaining unclaimed and unpaid for a period of seven years from the date they
became due for payment. [Section 205C(2) (b)(c) and read with its proviso]
Topic 162
DO YOU WISH TO SEEK EXTENSION OF TIME
FOR FILING RETURNS OF ALLOTMENT? [SECTION 75(3)]
1. Make an
applicationj to the concerned Registrar of Companies in the form of a letter
(there is no prescribed form for this) either before or immediately on the
expiry of the period of thirty days of the allotment of shares, on the letter
head of the company.
2. State in the
application detailed reasons for seeking extension of time for filing the
return of allotment.
3. Also specify in the above application the
additional time required for filing the return.
4. Pay the
application fee as required by Schedule X to the Companies Act, 1956, either in
cash, or treasury challan. [Rule 22]
5. Please keep in
mind that if default is made in complying with the aforesaid requirement, every
officer of the company who is in default will be punishable with fine upto to
Rs. 5,000/‑ for every day during which the default continues. [Section
75(4)]
Topic 163
1. Convene a
Board‑Meeting after giving notice to all the directors of the company as
per Section 286 and pass a resolution calling whole or any portion of the
unpaid amount on the shares of the company stating, inter alia, the time, the
place, the amount of call and the last date of making the payment.
2. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of upto Rs. 1,000/‑. [Section 286(2)]
3. The call
should be uniform on the same class of shares on which the same amounts have
been paid. [Section 91 ]
4. Comply with
any condition imposed in the Articles of Association of your company in this
regard.
5. If your
company's Articles of Association provide as in Table A to Schedule I to the
Companies Act, 1956, then no call shall exceed 'one‑fourth of the nominal
value of the share or payable at less than one month from the date fixed for
the payment of the last preceding call (applicable to subsequent calls).
[Proviso to Regulation 13]
6. Issue call
letters and send necessary reminders until the call is fully paid or the shares
are forfeited.
7. Make necessary
entries in various registers and endorsements on the share certificates.
8. If any amount
is paid in advance of calls on any shares, then stipulate that such amount may
carry interest but shall not in respect thereof confer a right to dividend or to
participate in profits.
9. This is applicable only to companies whose shares
are listed on recognised Stock Exchange.
10. If the shares of your company are listed on a
recognised Stock Exchange,then:
(i) Get
the call notices approved by the said Stock Exchange;
(ii) Intimate to the said Stock Exchange immediately after the
meeting of the Board of Directors under item I above, short particulars of
making calls;
(iii) Forward promptly to the said Stock Exchange three copies of
the call letters. [Clauses 4(b), 22(c), and 31(c) of the Standard Listing
Agreement]
(iv) Ensure that the calls are structured in such a manner that the
entire subscription money is called within 12 months from the date of
allotment. [Clause 8.62(a) of SEBI (DIP) guidelines 2000]
(v) Keep in mind that if the issue size of your company is above
Rs. 500 crores and is subject to monitoring requirement under clause 8.17.1 of
SEBI (Disclosure and Investor Protection) Guidelines 2000, it will not be
necessary to call the entire subscription money within 12 months. [Clause
8.6.2(c) of SEBI (DIP) Guidelines, 2000]
11. Take note of Regulations 13 to 18 of Table A of
Schedule I to the Act also.
12. Note that if
your company's paid‑up share capital is less than Rs. 50 lakhs but is
equal to or more than Rs. 10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole‑time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the
company has issued shares and made calls thereunder during the financial year
and complied with the provisions of the Act as per paragraph 19 of the Form of
Compliance Certificate appended to the Companies (Compliance Certificate)
Rules, 2001.[Section 383‑A(1) proviso]
Topic 164
DO YOU WISH TO PAY INTEREST ON MONEY
ACCEPTED IN ADVANCE OF CALLS ON SHARES?
1. See whether
your Articles of Association provide for payment of interest on money accepted
in advance of calls as shares.
2. If your
company has adopted Table A in respect of any matter on which the Articles are
silent, then Table A of Schedule I to the Act will apply and interest at the
rate of 6 per cent will be payable per Regulation 18(b).
3. Otherwise, alter the Articles of Association
accordingly vide Topic 26.
4. Call a Board
Meeting after giving notice to all the directors of the company as per Section
286 and pass a Board Resolution approving such payment of interest.
5. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of Rs. 1,000/‑.[Section 286(2)]
(Topic 165 to Topic 180)
Topic 165
DO YOU WISH TO TRANSFER SHARES OR
DEBENTURES?
1. Obtain the
prescribed transfer deed Form, which is in Fon n No. 7B, endorsed by the
Registrar of Companies who is one of the prescribed authorities under Section
108(1A)(a). [See section 108(1C) and (1D) or exemptions in this regard]. In
case of a company whose shares are listed with OTC Exchange of India the
instrument of transfer should be in Form No. 7BB.
2. The instrument of transfer may not be in the
prescribed form in the following cases
(i) Shares transferred by a director or nominee on behalf of
another body corporate under section 49(2) and (3);
(ii) Shares transferred by a director or nominee on behalf of a
corporation owned or controlled by the Central or State Government;
(iii) Shares transferred by way of deposit as a security for
repayment of any loan or advance if they are made with any one of the
following:
(a) State
Bank of India; or
(b) any
scheduled bank; or
(c) any
other banking company; or
(d) financial
institution; or
(e) Central
Government; or
(f) State
Government; or
(g) any corporation owned or controlled by the Central or State
Government; or
(iv) Trustees
who have filed the declarations.
3. For
transferring debentures, the instrument of transfer need not be in the
prescribed Form No. 7B. But this Form can be used, being convenient to do so.
4. Get this
transfer deed duly stamped and executed both by the transferor and the
transferee or on their behalf in accordance with sections 108 and 109 of the
Act and the Articles of Association, in case of shares, and also in accordance
with trust deed in the case of debentures.
5. The transfer
deed should bear stamps according to the Indian Stamp Act, and Stamp Duty
notification in force in the State concerned.
6. The present
rate for transfer of shares is 0.50 P. per hundred rupees of the value of
shares or part thereof.
7. Where,
however, a share transfer is made from a trustee to a trustee or from a trustee
to the beneficiary the said stamp duty is Rs. 7.50 generally (Rs. 10/‑ in
West Bengal) per transfer deed.
8. Also in the
case of transfer of shares to any of the following institutions or their
nominees as secur4y for advance granted by such institutions (and not
otherwise) maximum stamp duty leviable is Rs. 7.50 per transfer deed
(a) Reserve
Bank of India;
(b) The
State Bank of India or any of its subsidiaries;
(c) Any
company which transacts the business of banking;
(d) Any other banking institution notified under section 51 of
the Banking Regulation Act, 1949.
9. The concession
is also applicable to transfers executed by the above institutions or their
nominees while returning shares held as security for advance granted.
10. A transferor,
however, must be a registered holder of the shares concerned in order to avail
the concessional stamp duty for the transfer as mentioned above.
11. In case of
debentures, the stamp duty is 0.37 P. per hundred rupees value of debentures up
to Rs. 1,000/‑ and the stamp duty will vary afterwards.
12. Keep in mind
that no stamp duty is liable to be paid on transfer of registered ownership of
shares from a person to a depository or from a depository to a beneficial
owner.
13. See that the
stamps affixed on the transfer deed are cancelled at the time or before signing
of the transfer deed.
14. The signature
of the transferor in the share/debenture transfer Form must be witnessed by one
other person giving his signature, name and address.
15. Attach
the relevant share or debenture certificate or allotment letter with the
transfer deed and deliver the same to the company with an application for the
transfer.
16. The share
transfer deed should be deposited with the company within the following time
limits, viz. (i) where the shares are dealt in or quoted on a recognised Stock
Exchange, at any time before the date on which the Register of Members is
closed, in accordance with law, for the first time after the date of
endorsement of the prescribed forms as per item I above, or within twelve
months from the date of such endorsement, whichever is later, (ii) in any other
case, within two months from the date of such endorsement. [Section 108 (1A)(b)].
[See Section 108(1C) and (1D) for exemptions in this regard].
17. An application
for transfer can be made either by the transferee or by the transferor.
[Section 110(1)]
18. Where the
application is made by the transferor and relates to partly paidup shares, the
company has to give due notice of application to the transferee and the
transferee has to raise objection, if any, within two weeks from the date of
receipt of the said notice. [Section 110(2) and (3)]
19. Where signed
transfer deed has been lost, affix the same stamp on the written application in
which case the Board may, if it thinks fit to do so, register the transfer on
such terms of indemnity as it thinks fit. [Section 108(1) and Proviso]
20. If the shares
of your company are listed on a recognised Stock Exchange, then you cannot
charge any fee for registration of transfers of your shares and debentures.
[Clause 8(a) of the Standard Listing Agreement]
21. In case of a
private company, comply with the restrictions imposed for transfer of shares in
the Articles of Association of the company concerned vide Topic 169.
22. In case of
transfer to a non‑resident from a resident, obtain necessary permission
from the Reserve Bank of India under section, 19 of the Foreign Exchange
Regulation Act, 1973 unless general permission is already given by the said
Bank.
23. In case of a
transfer from a non‑resident to a resident, no such permission is
required but certain particulars are required to be furnished to the Reserve
Bank of India.
24. If the
transferor is a body corporate, see that a Board Resolution of the transferor
is passed to this effect, and proper authority has been given by the Board of
directors to the person signing as the transferor on behalf of the company.
25. The Board of
Directors will consider the application for transfer and will either order for,
or refuse, registration in exercise of the powers given by the Articles of
Association.
26. In case of
refusal, the company beinf either a private company or a deemed public company
under section 43A has to notify the transferee and transferor within two months
from the date on which the valid transfer deed was delivered to the company.
[Section 111]. In case of refusal made by a public company, it has to do so,
within two months from the date on which the instrument of transfer or the
intimation of transfer is delivered to the company. [Section 111A(2) proviso]
27. Please keep in
mind that if your company is a private company which is a subsidiary of a
public company, it will be treated as a public company. [Section 3(1)(iv)(c)]
28. While transferring your shares or debentures, check
up, inter alia
(a) that there is nothing prohibiting the transfer in any
agreement of loan or collaboration or otherwise, entered into with you or the
company;
(b) that there is nothing prohibiting the transfer in the order
of the Controller of Capital Issues, made before 29th May, 1992, if any;
(c) that the Central Government or the Company Law Board has not
imposed any restriction on transfer. [Sections 247, 248 and 250];
(d) that whether a transferor objects to the transfer provided he
serves on your company within a reasonable time a prohibitory order of a Court
of competent jurisdiction.
29. Take note of
the provisions contained in Regulations 19 to 24 of Table A of Schedule I to
the Act.
30. Keep in mind
that provisions of section 108 will not
apply, to transfer of security by the transferor and the transferee both of
whom are entered as beneficial owners in the records of a depository. [Section
108(3)]
31. Nominate a
person to whom your shares in or debentures of the company will vest in the
event of your death in Form No. 2B. [Section 109A]
32. Note that the
provision for nomination is not present in the existing prescribed transfer form
which has to be altered to provide for the same after 31st October, 1998.
33. Further note
that while transferring shares you do not contravene the provisions of SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
34. Keep in mind
that inter‑depository transfer of securities do not require compliance
with the formalities prescribed under section 108 neither do they attract stamp
duty. [Press Release Reference No. PR 187/99, Dated 23‑8‑1999
issued by SEBI]
35. If your
company is a listed company and Share Transfer Agents are handling and
processing your company's share transfer work including transfer documents/bad
delivery documents/stock invests etc., then ensure that they mandatorily follow
the guidelines agreed upon by various market intermediaries consisting of the
following three parts including drafts of the formats to be used therefor:
(i) general
norms for processing of documents;
(ii) norms
for processing of transfers;
(iii) norms
for objection.
[RII Circular No. 1 (2000‑2001) dated 9‑5‑2001
issued by primary market department of SEBI u/s. 11B of SEBI Act, 1992]
36. Also keep in
mind that if your company's paid up share capital is less than Rs. 50 lakhs but
is equal to or more than Rs. 10 lakhs, then your company is required to obtain
a Compliance Certificate from a secretary in whole‑time practice to be
filed with the Registrar of Companies mentioning therein inter alia that your
company has delivered all the certificates on lodgement thereof for transfer in
accordance with the provisions of the Act, as per paragraph 13(i) of the Form
of Compliance Certificate appended to the Companies (Compliance Certificate)
Rules, 2001. [Section 383‑A(1) proviso]
Topic 166
DO YOU WISH TO HAVE SHARES OR DEBENTURES
TRANSMITTED IN YOUR FAVOUR?
1. Make an
applicationt to the company stating that the shares or debentures should be
transmitted in your name, giving sufficient proof of your title to them by
furnishing a succession certificate or a probate if there is a will or if the
value of the property of the deceased's estate is Rs. 2,00,000/‑ or less
then a certificate from the Administrator General of the State in which the
registered office of your company is situated.
2. Enclose
therewith the share or debenture certificates and the transmission fee, if any, prescribed by the company.
3. No instrument of transfer is required for this
purpose.
4. In case of
insolvency of a shareholder, the receiver appointed by the Court will sign the
transfer Form personalis designatio.
5. The Board or
the Share Transfer Committee of the Board, after considering the applicationce,
for transmission, will either order for or refuse the transmission in exercise
of powers given to them by the Articles of Association.
6. In case of
refusal, the company has to notify the applicant accordingly within two months
from the date of application. [Section 111 or Section 111A]
7. If you object
to the transmission, prefer an appeal with the Company Law Board vide Topic 172
in case of a private company [Section 111(2) read with section 111(14)] and
vide Topic 173 in case of a public company. [Section 111A(2) proviso]
8. Please keep in
mind that if default is made in complying with any of the provisions of section
111, the company and every officer of the company who is in default will be
punishable with fine upto Rs. 500/- for every day during which the default
continues. [Section 111(12)]
9. Take note of
the provisions contained in Regulations 25 to 28 of Table A of Schedule I to
the Companies Act, 1956.
10. Further note
that if your company's paid‑up share capital is less than Rs. 50 lakhs
but is equal to or more than Rs. 10 lakhs then your company is required to
obtain a Compliance Certificate from a secretary in whole‑time practice
to be filed with the Registrar of Companies mentioning therein inter alia that
your company has delivered all the certificates on lodgement thereof for
transmission in accordance with the provisions of the Act, as per paragraph
13(i) of the Form of Compliance Certificate appended to the Companies
(Compliance Certificate) Rules, 2001. [Section 383‑A(1) proviso]
Topic 167
1. Note that if
you are a nominee of any shareholder or debenture holder or fixed deposit
holder then on the death of that shareholder or debenture holder or fixed
deposit holder you can either elect to be registered yourself as holder of the
shares or debentures or you can make such transfer of shares or debentures as
the case may be as the deceased shareholder or debenture holder could have
made. [Section 109B(1) read with Section 58A(11)]
2. If you elect
to make such transfer of shares or debentures as the deceased shareholder or
debenture holder could have made, follow the procedure given in Topic 166.
3. If you elect
to be registered yourself as holder of the shares or debentures or fixed
deposits of the deceased shareholder or debenture holder or fixed deposit
holder then take the steps given below.
4. Check whether
the Board of Directors of the company has given you any notice requiring you to
elect either to be registered yourself as a member or debenture holder or to
transfer the shares or debentures. [Section 109B(4) proviso]
5. If such a
notice is received by you from the Board then comply with the, said notice
within 90 days. Otherwise the Board may on the expiry of 90 days withhold
payment of all dividends, bonuses or other moneys payable in respect of the
shares or debentures until the requirements of the notice are not complied
with. [Section 109B(4) proviso]
6. If you do not
get any notice from the company then deliver or send to the company a notice in
writing signed by you stating that you elect to be registered as holder of
shares or debentures and in case of fixed deposit, you should be registered as
holder of fixed deposits, and ensure that such notice is accompanied with the
death certificate of the deceased shareholder debenture holder or fixed deposit
holder as the case may be. [Section 109B(2) read with Section 58A(11)]
7. Further note
that all the limitations, restrictions and provisions of this Act relating to
the right to transfer and the registration of transfers of shares or debentures
will be applicable to any such notice or transfer as aforesaid as if the death
of the member had not occurred and the notice or transfer were a transfer
signed by that shareholder or debenture holder or fixed deposit holder as the
case may be. [Section 109B(3)]
8. Keep in mind
that you are entitled to same dividends and other advantages to which you would
have been entitled if you were the registered holder of the shares or
debentures or fixed deposits except that you will not before being registered
as a member in respect of the shares of the deceased shareholder or being
registered as a debenture holder in respect of the debentures of the deceased
debenture holder be entitled in respect of it to exercise any right conferred
by membership in relation to meetings of the company. [Section 109B(4) read
with Section 58A(11)]
Topic 168
DO YOU WISH TO DEAL WITH TRANSFER OF
SHARES BY A LEGAL REPRESENTATIVE?
1. The legal
representative or representative of a deceased member may transfer the shares
standing in the name of the deceased member as if he is or they are the member
or members. [Section 109]
2. Execute a
share transfer deed in Form No. 7B or 7BB in case of shares dealt in OTC
Exchange of India in the name of the legal representative as the transferor and
fill in all other particulars asked in it.
3. If there are
more than one legal representatives, give all their names as joint transferors.
4. Before it is
signed by the transferor, present it to the prescribed authority who will give
the date on it.
5. Fill the name
or names of the transferee or transferees and get it signed by him or them.
6. See that the
names of the transferors (the legal representatives) and the transferee are
witnessed by two persons who shall sign their names and give their addresses.
7. Affix proper stamp on the transfer deed as
prescribed by the Indian Stamp Act.
8. It is
generally 0.50 P. for transfer of shares of every one hundred rupees or part
thereof of the value of the share.
9. See that the
stamps on the transfer deed are cancelled at the time or before signing of the
transfer deed.
10. If you are a
nominee of any deceased shareholder or debentureholder then you can transfer
the shares or debentures standing in the name of the deceased shareholder or
debentureholder as if you are the deceased shareholder or debentureholder and
follow the procedure mentioned above. [Section 109B(1)(b)].
11. Lodge the transfer deed along with the share
certificates to the company:
(i) in case of quoted shares, at any time before the date on
which the register of members is closed for the first time after the date of
the presentation before the prescribed authority or within twelve months from
the date of such presentation whichever is later;
(ii) in any other case, within two months from the date of such
presentation. [Section 108(1‑A)(b)]
Topic 169
DO YOU WISH TO TRANSFER THE SHARES OF A
PRIVATE LIMITED COMPANY? [SECTION 108]
1. Please note
that Section 3(1)(iii)(a) provides that a private company must restrict the
right to transfer its shares by its Articles.
2. The aforesaid
provision does not prohibit the right to transfer shares absolutely but ensures
that such transfer of shares is made in accordance with the conditions and
restrictions laid down in the Articles of the private company.
3. One of the
conditions is that such transfer should not result in the increase of members
beyond fifty, excluding present and past employees. [Section 3(1)(iii)(b)]
4. There may be
other conditions in the Articles which are to be strictly followed besides
those contained in Section 108 while transferring the shares of a private
company.
5. Moreover, the
existing value of shares, although they are not quoted on any Stock Exchange,
on which basis the stamp duty is to be affixed on the transfer form, is to be
determined before transferring the shares.
6. Make an
applicationt to the Board giving details of the proposed transfer, that is, the
number of shares, consideration, name of the proposed transferee, etc.
7. If the Board
nominates a transferee, in place of the proposed transferee, then proceed to
execute the transfer in favour of the nominee.
8. Fill up the
transfer form in Form No. 7B duly giving the number and amount of shares and
the name, address and occupation of the transferor and transferee of the shares
comprising in the certificate.
9. The amount or
consideration of shares transferred should be as per the value duly
ascertained, which is usually the book value of shares.
10. Get the
signature, full name and address of one witness in the above transfer form and
the signature of transferor(s) and transferee(s).
11. The said witness will be signing just below the
signature of the transferor.
12. Put the date
of transfer on the transfer form and see that the date so given is within two
months of the date endorsed by the prescribed authority.
13. Affix stamp on
the transfer form as required under the Indian Stamp Ace and as applicable in
the State in which the registered office of the private company is situated.
14. See that the
stamps so affixed are cancelled at the time or before signing of the transfer
deed.
15. If complete in
all respects, the Board will approve such transfer and pass the resolution
approving the transfer of shares in the private company.
16. In case you
feel aggrieved with the decision of the Board, file an appeal with the Company
Law Board against the refusal in accordance with the provisions of Section
111(2).
17. Keep in mind
that a private company under its Articles of Association can enforce the
restrictions contained therein against the right to transfer its shares.
[Section 111(13)]
18. Nominate a
person to whom your share in or debentures of the company will vest in the
event of your death in the manner prescribed by Form No. 2B.[Section 109A]
Topic 170
DO YOU WISH TO REFUSE TRANSFER OF
SHARES?
1. See whether
the Articles of Association of your company give the power to refuse transfer
of shares. If they do not, give such power by altering the Articles of
Association accordingly vide Topic 26
2. Call a Board
Meeting after giving notice to all the directors of the company as per section
286 and take the decision of refusal to register transfer of shares by passing
a resolution.
3. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of Rs. 1,000/‑.[Section 286(2)]
4. Send noticef
of the refusal to the transferee and the transferor or to the person who has
lodged the transfer within two months from the date on which the instrument,of
transfer or the intimation of transmission is received by your company.
[Section 111(1)]
5. In case of a
private company give in the aforesaid notice reasons for such refusal. [Section
111(1)]
6. Please keep in
mind that if default is made in complying with the provisions of section 111,
the company and every officer of the company who is in default will
be'punishable with fine upto to Rs. 500/‑ for every day during which the
default continues. [Section 111(12)]
7. In case of a
public company give in the notice sufficient cause for such refusal. [Section
111A (2) Proviso]
8. Mention the
total number of shares and their distinctive numbers in the notice of refusal.
9. Enclose the
instrument of transfer and the share certificates with the notice sent to the
transferor or transferee or the person who has lodged the transfer.
10. State the reasons for such refusal in the notice.
11. Board of
Directors of your company can refuse transfer of shares on any of the following
grounds:
(i) the transfer of shares, not being fully paid‑up
shares, to a person of whom they do not approve;
(ii) any
transfer of shares on which the company has a lien;
(iii) the
Board declines to recognise any instrument of transfer unless:
(a) a fee of two rupees is paid to the company in respect thereof
[not applicable to listed companies]; or
(b) the instrument of transfer is in respect of only one class of
shares. [Regulations 21 and 22 of Table A of Schedule I]
12. Registration of transfer of shares is commonly
refused in the following cases:
(i) Instrument of transfer not lodged within the period
prescribed under Section 108;
(ii) Prescribed instrument of transfer is not in use [unless the same
is dispensed with under Section 108(1C)];
(iii) Instrument
of transfer is not completed in all respects;
(iv) Instrument
of transfer is not duly stamped;
(v) Stamps
used are of appropriate value but are not defaced;
(vi) Shares
transferred are partly paid and the transferee is a minor;
(vii) Shares are partly paid and the transferee has refused to become
a member on receipt of the notice under Section 110(2);
(viii) Instrument
of transfer is not accompanied by all the necessary documents;
(ix) Instrument of transfer or any of the documents had contained
mistakes and they were sent back for correction but had not been returned to
the company;
(x) The company is statutorily prohibited from registering the
transfer by virtue of any order of the Central Government.
13. Do not return
transfer deeds on the ground inter alia that the signatures of the transferor
does not tally, where the same are attested by notary public stock broker and
magistrate etc., but satisfy yourself about the, genuineness of signatures by
making a reference to the transferor.
14. Keep in mind
that subject to the provisions of section 111 A the shares or any interest
therein of a public company should be freely transferable.
15. Further keep
in mind that a public listed company can only refuse transfer of shares or
debentures if it is in contravention of any of the provisions of Securities and
Exchange Board of India Act, 1992 or regulations made therein or the Sick
Industrial Companies (Special Provisions) Act, 1985 or any other law for the
time being in force. [Section 111A(3)]
16. Also keep in
mind that registration of shares cannot be refused on the basis of mere
allegation that any share acquisition contravenes SEBI Takeover Regulations
unless such an allegation is adequately substantiated. The question of any
contravention of the said Regulations will not arise, where the aggregate
shareholding of a group of members acting in concert is not proved to amount
10% or more. [Azzalifi Finlease & Investments (P) Ltd. & Another v.
Ambalal Sarabhai Enterprises Ltd., (1999) 35 CLA 437 (CLB)]
Refusal to register transfer of shares on frivolous
ground
Circular No. 3 of 1993, dated 22nd March, 1993
It has been brought to the notice of this
Department that certain companies are returning instruments of transfer without
effecting transfer of shares in the names of transferees on frivolous grounds,
inter alia, that the specimen signatures of transferors do not tally with that
on record, in spite of the fact that the transfer forms bear attestation of the
magistrates, etc. In this connection, it may be stated that as per instructions
below the prescribed share transfer form (No. 7‑B) "attestation,
where required, of thumb impression, marks, signatures, etc., should be done by
a magistrate, notary public or special executive magistrate or a similar
authority holding a public office or a member of a recognised stock exchange
through whom the shares are introduced or a member of the transferor's
bank." Further, the guidelines for good or bad delivery issued by the
Ministry of Finance, Department of Economic Affairs, vide their Circular No.
1/10/SE/83, dated 21‑7‑1983 also provide a similar requirement. You
are, therefore, requested to advise your constituent member companies to follow
the aforesaid instructions scrupulously and to effect transfer of shares within
the period prescribed under Section 113 of the Companies Act, 1956, and the
listing guidelines.
Topic 171
1. Note that
section 111 provides remedy by way of appeal to the Company Law Board against
refusal to register transfer or transmission of shares, and also under section
111A against refusal to register transfer of shares.
2. Further note
that for the purpose of making an appeal, the period of limitation is two
months from the date of receipt of refusal or four months from the date of
lodgement of the instrument of transfer or intimation of transmission. [Section
111(3) read with section 111A(2) proviso and (3)]
3. Please keep in
mind that once the aforesaid period of limitation is over, no appeal can lie against refusal to register transfer
or transmission of shares.
4. Note, however,
that no period of limitation is prescribed for making an application to the
Company Law Board for rectification of the register of members under sub‑section
(4) of section 111 , and under sub‑section (7) of section 111A.
5. Further note
that while sub‑sections (2) and (3) of section 111 deal with appeal
against refusal to register transfer or transmission of shares and subsection
(2) proviso of section 111A deals with appeal against refusal to register
transfer of shares, sub‑section (4) of section 111 and sub‑section
(3) of section 111A deal with application for rectification of register of
members.
6. Please also
keep in mind that where default has been made in entering the name of the
transferee in the register of members, an application for rectification lies in
sub‑section (4) of section 111 and in sub‑section (7) of section
111A.
7. The
distinction between appeal and application is not only recognised by section
111 by the specific language used in Sub‑sections (2) and (3) on the one
hand and sub‑section (4) on the other, but also recognised by sub‑section
(10) of section 111.
8. In case the
period of limitation for appeal has already expired, you may make an
application to the Company Law Board to achieve the same result, under sub‑section
(4) of section 111 and under sub‑section
(3) of section 111 A.
9. This is how an
application may lie even beyond the period of limitation. For procedure see
Topic 229.
10. Please keep in
mind that if default is made in complying with the provisions of section 111,
the company and every officer of the company who is in default will be
punishable with fine upto to Rs. 500/‑ for every day during which the
default continues. [Section 111(12)]
Topic 172
1. In case a
private company including a deemed public company under section 43A does not
send you notice of refusal of registration or refuses to register transfer or
transmission within two months, you can prefer an appeal against the same to
the Company Law Board within the period of two months from the date of receipt
of notice of refusal. [Section 111(2)]
2. Where no
notice as aforesaid has been sent by the company within four months from the
date on which the instrument of transfer or the intimation of transmission was
delivered to the company from the date of expiry of the period of intimation,
as the case may be. [Section 111(3)]
3. In case a
public company refuses to register transfer of shares within two months from
the date on which the instrument of transfer or the intimation of transfer is
delivered to that company you can prefer an appeal against the same to the
Company Law Board. [Section 111A(2) Proviso]
4. Make the
appeal by way of a petition to be prepared in Form No. 1 in Annexure II of the
Company Law Board Regulations, 1991.
5. Address the
petition to the Bench Officer, Company Law Board, Northern Region Bench, at New
Delhi or Eastern Region Bench, at Calcutta or Western Region Bench, at Mumbai or
Southern Region Bench, at Chennai as the case may be depending on the
jurisdiction of the particular Bench on the situation of the Registered Office
of the company whose shares are involved.
6. The following will be enclosed to the petition:-
(i) Documentary evidence, if any, in support of the statements
made in the petition, including a copy of the letter written by the petitioner
to the company in this regard and the company's letter of refusal.
(ii) Copies
of the documents returned by the Company.
(iii) Affidavit verifying the aforesaid petition which should be
prepared on a nonjudicial stamp paper of the requisite value prevalent in the
State and should be either notarised by the Notary Public or sworn before the
Oath Commissioner.
(iv) Demand
draft evidencing payment of the fee of Rs. 500/-.
(v) Memorandum of Appearance in Form No. 5 of the Company Law
Board Regulations, 1991 with certified true copy of the Board Resolution or the
executed Vakalatnama as the case may be.
7. The affidavit
should be drawn up in first person and shall state the full name, age,
occupation and complete residential address of the deponent and shall be signed
by the deponent. [Regulation 14(5) of the Company Law Board Regulations, 1991]
8. If the
deponent is not personally known to the person before whom the affidavit is
sworn, he should be identified by a person who is known to the person before
whom the affidavit is sworn. [Regulation 14(6) of the Company Law Board
Regulations, 1991]
9. The said
affidavit should clearly and separa'tely indi cate statements which are true to
the knowledge of the deponent, information received by the deponent, belief of
the deponent and information based on legal advice. [Regulation 14(7) of the
Company Law Board Regulations, 1991]
10. Where any
statement is stated to be true to the information received by the deponent, the
affidavit shall also include the name and complete residential address of the
person from whom the information has been received by the deponent and whether
the deponent believes that information to be true. [Regulation 14(8) of the
Company Law Board Regulations, 1991]
11. Please ensure
that the aforesaid petition is written, type‑written, cyclostyled or
printed neatly and legibly on one side of the substantial paper of foolscape
size in double space and separate sheets shall be stitched together and every
page consecutively numbered. [Regulation 11 o the Company Law Board
Regulations, 1991]
12. Numbers and
dates specified in the aforesaid petition should be expressed in figures as
well as in words. The petition should be divided into separate para graphs
which should be numbered serially and shall state thereon, the matter and the
name of the company to which it relates. [Regulation 12 of the Company Law
Board Regulations, 1991]
13. Affix a Court‑fee stamp of the requisite
value 4 on the petition, before submission.
14. Please ensure
that the aforesaid petition is presented by the petitioner in original and two
extra copies thereof through the authorised representative of the company in
person to the office of the Bench or sent by registered post with
acknowledgment due addressed to the Bench Officer of the Bench concerned.
[Regulation 14(1) of the Company Law Board Regulations, 1991]
15. Pay the filing
fee of Rs. 500/‑ as per Rule 3 read with Rules 4 and 5 of the Company Law
Board (Fees on Applications & Petitions) Rules, 1991, by way of demand
draft drawn in favour of Pay and Accounts Officer, Department of Company
Affairs, New Delhi or Calcutta or Mumbai or Chennai as the case may be
depending on the Bench on which it will be filed, and payable at New Delhi or
Calcutta or Mumbai or Chennai.
16. On the appeal
being admitted, notice thereof shall be served by registered post with
acknowledgement due on the company and the transferor or the person giving
intimation of the transmission and they would be required to file a reply and
other documents on which the reply is based and thereafter the petitioner would
be required to file counter‑reply to the reply. [Regulations 21, 22 of
the Company Law Board Regulations, 1991]
17. There is no
further right of appeal or representation once an appeal has been disposed of.
18. The only
remedy, thereafter, lies in filing an appeal to the High Court within sixty
days from the date of communication of the decision of the Company Law Board to
the petitioner on any question of law arising out of such order.
19. This can be
done provided that the High Court may, if it is satisfied that the appellant
was prevented by sufficient cause from filing the appeal within the said period
allow it to be filed within a further period not exceeding sixty days. [Section
10E]
Topic 173
1. Note that
under section 111A(3) of the Act, any depository, company, participant,
investor or the Securities and Exchange Board of India can make an application
to the Company Law Board for rectification of the Register or Records of any
company or depository, if the transfer of shares or debentures is in
contravention of any of the provisions of SEBI Act, 1992 or regulations made
thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985, or
any other law for the time being in force.
2. See that the
application is made within two months from the date of transfer of any shares
or debentures held by a depository or two months from the date on which the
instrument of transfer or the intimation of transmission was delivered to the
company. [Section 111A(3)].
3. Note that the
Company Law Board will direct rectification of register of records only if
after inquiry it thinks fit that the transfer of shares or debentures in
question was in contravention of any of the provisions of the Securities and
Exchange Board of India Act, 1992 (SEBI) or regulations made thereunder or in
contravention of the Sick Industrial Companies (Special Provisions) Act, 1985.
4. Note that the
Company Law Board while inquiring into the subject matter of the aforesaid
application may at its discretion make such interim order so as to suspend the
voting rights before making or completing such enquiry. [Section 111A(4)].
5. Also note that
unless the voting rights have been suspended by an order of the Company Law
Board on the aforesaid application, the right of a shareholder or
debentureholder to transfer the shares or debentures will not be restricted.
[Section 111A(5)]
6. Further note
that any transfer made during the pendency of the application will entitle the
transferee to voting rights unless they are suspended by any order of the
Company Law Board.
7. Note that the
aforesaid application can be made by a depository which is a company formed and
registered under the Act and which has been granted a certificate of
registration by the SEBI, under Regulation 7 of the SEBI (Depositories and
Participants) Regulations, 1996.
8. Where the
participant makes the application ensure that such a participant is registered
as such with the SEBI, under Regulation 20 of the SEBI (Depositories and
Participants) Regulations, 1996.
9. Follow the procedure as embodied in Topic 172 for
making an application to the Company
Law Board.
Topic 174
1. Make the
application in Form No. 7Ct whether before or after the expiry of time required
on a plain paper specifying therein the following
(i) The full name and address of the applicant as well as the
name and address of the beneficial holder of the shares, forming the
subjectmatter, of the transfer, if he is other than the applicant;
(ii) The
full name and address of the transferor;
(iii) The
period of extension of time sought;
(iv) Full reasons for the extension of time applied for along with
documentary evidence wherever necessary. [Rule 5A(4)]
2. Address the
application either to the Registrar of Companies of the State in which the
registered office of the company is situated4 or to the Registrar of Companies
of the State in which the applicant transferee ordinarily resides.[Notification
GSR No. 481(E), dated 22‑4‑1988]
3. Annex the following documents along with the
application:
(i) The
instrument of transfer forming the subject‑matter of the application;
(ii) Demand draft or treasury challan evidencing the payment of
Rs. 50/-if the face value of the shares involved does not exceed Rs. 5,000/‑
or Rs. 100/‑ if it so exceeds, or the receipt towards proof of cash
payment under the Rule 2(2) of the Companies (Fees on Applications) Rules,
1999.
4. If the
application fee is paid by way of treasury challan, then pay the requisite fee
of Rs. 50/‑ or Rs. 100/‑, as the case may be as prescribed by the
Companies (Fees on Application) Rules, 1999, by way of treasury challan
prepared in triplicate and paid in cash into any of the specified branches of
the Punjab National Bank for credit.
5. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(2) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21‑6‑1996
(w. ef 21‑6‑1996). For account head and code please see Rule 22(2)
in Appendix 1.
6. Two copies of
the treasury challan will be given back to the depositor out of which the
original copy should be attached to the application mentioned in item 3(i).
7. If the
application fee is paid by way of demand draft, then draw the demand draft in
favour of "Pay and Accounts Officer, Department of Company Affairs, New
Delhi or Calcutta or Mumbai or Chennai", and payable at any bank located
in New Delhi or Kolkata or Mumbai or Chennai as the case ma~ be depending on
the region in which the office of the Registrar of Companies is situated and
the said demand draft should be attached to the application mentioned in item
3(i).
8. Deliver a copy
of the application to the concerned company whose shares are the subject‑matter
of the transfer.
9. On the receipt
of the application the concerned Registrar of Companies will make an
endorsement on the transfer deed itself by rubber stamp and it will be returned
to the applicant across the table. [Circular No. 1/95 vide F. No. 14/6/94 CL‑V,
dated 16‑2‑1995]
10. As per the
Citizen's Charter of the Department of Company Affairs, Schedule III, Serial
No. 4, the said application will be processed by the concemed Registrar of
Companies within 3 working days. [No. 5/25/99‑CL‑V, Press Note No.
9/99 dated 9‑8‑1999.]
Topic 175
1. Verify the following before making the application
(i) Whether the company whose shares are to be acquired is a
public Limited Company or a Private Limited Company which is a subsidiary
company of a public limited company;
(ii) Whether the company whose shares are proposed to be acquired
is owner of an undertaking manufacturing the same product as the undertaking
owned by your company;
(iii) Whether the total nominal value of equity shares proposed to
be acquired together with shares already held in that company, if any, exceeds
twentyfive per cent of the paid‑up equity capital of that company;
(iv) Whether as a result of the proposed acquisition, the
undertaking owned by you and/or the undertaking owned by the company whose
shares are to be acquired, would become a dominant undertaking.[Section 108G]
2. Please note
the specified cut‑off limit of above 25% as mentioned in item l(iii)
above is to be calculated with reference to the aggregate holdin i s, if any,
of other bodies corporate also which are under the same management as the acquiring
company.
3. Make the
application (only if all the four conditions specified above are satisfied) in
Form No. 7D in triplicate and address it to the Secretary, Department of
Company Affairs, Ministry of Law, Justice & Company Affairs, Shastri
Bhavan, 5th Floor, "A" Wing, Dr. Rajendra Prasad Road, New Delhi‑
110 001.
4. Pay the fee of
Rs. 500/‑ as prescribed under Rule 5B(2) by way of treasury challan at
any Government treasury or the Reserve Bank of India or any office of the State
Bank of India or its subsidiaries for credit. The description of the Head of
account of the treasury challan should be as prescribed under Rule 22(2) of the
Companies (Central Government's) General Rules and Forms, 1956 and as amended
vide GSR 25](E), dated 21‑6‑1996 (w.e.f. 21‑6‑1996).
For account head and code please see Rule 22(2) in Appendix 1.
5. If the application
fee is paid by way of demand draft then draw the demand draft in favour of
"Pay and Accounts Officer, Department of Company Affairs, New Delhi",
and payable at New Delhi.
6. Enclose the following documents along with the
application and its eleven copies:
(i) A treasury challan or demand draft towards prescribed
application fee of Rs. 500/‑;
(ii) One certified true copy of the audited balance‑sheet
and profit and loss account of the company whose shares are proposed to be
acquired for each of the last years immediately preceding the year in which
shares are proposed to be acquired;
(iii) If the applicant is a company, then one certified true copy of
the audited balance‑sheet and profit and loss account of the company for
the last preceding three years;
(iv) Certified
true copies of Board and General Meeting Resolutions;
(v) Statement of value of assets of the company whose shares are
proposed to be acquired during the last two years together with the basis of
valuation [see item 10(a) of Form 7D]
(vi) Cash flow statement for five years including the transfer is
prop osed, if the acquire is a company [see item 17(a) of Form 7D];
(vii) A copy of the approval under FEMA, if necessary. [See item
18(b) of Form 7D]
7. Pass the
necessary special resolution if required under section 372A , by holding a
general meeting.
8. Forward
promptly to the recognised Stock Exchange with which the shares of your company
are listed a copy of the proceedings of the General Meeting. [Clause 31(d) of
the Standard Listing Agreement]
9. File with the
concerned Registrar of Companies' printed or type‑written copy of the
Special Resolution with relevant Explanatory statement duly certified under the
signature of an officer of the company in Form No. 23 within thirty days of its
passing [Section 192(1) & (4)(a)] after paying requisite fee prescribed
under Schedule X to the Companies Act, 1956, either in cash, or treasury
challan. [Rule 22]
10. Please keep in
mind that if default is made in complying with aforesaid requirement, the
company and every officer of the company who is in default will be punishable
with fine upto to Rs. 200/- for every day during which the default continues.
[Section 192(5)]
11. On receipt of
the approval of the Central Government, hold a Board Meeting by issuing notice
to all the directors of the Company as per Section 286 and pass a resolutionj
authorising the company to acquire shares of the other company in excess of
twenty‑five per cent of the paid‑up equity capital of the other
company.
12. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of Rs. 1000/- [Section 286(2)]
13. Note that if
the nominal value of the shares proposed to be acquired is less than Rs.
10,000/‑. The information in respect of items 9(h), 9(i), 10(a), 10(b),
17(a) and 17(b) of Form. 7D need not be given.
14. Further note
that any person who acquires shares in contravention of the requirements of
section 108 will be punishable with imprisonment for a term of three years or
with fine of Rs. 50,000/- or with both. [ Section 108‑1(1)]
Topic 176
1. Before making the transfer, verify the following:
(i) Whether you own any undertaking which is dominant within the
meaning of Section 2(d) of the MRTP Act, 1969; [Section 108G(c)];
(ii) Whether your holdings together with those under the same
management as yours [as defined in Explanation I to Section 2(g) of the MRTP
Act, 1969] add up to ten per cent or more of the nominal value of the
subscribed equity capital of that company;
(iii) Whether the undertaking owned by the company whose shares are
proposed to be acquired on transfer would become a dominant undertaking as a
result of such transfer/acquisition. [Section 108G(b)]
2. If the above
mentioned conditions are fulfilled, then give an intimation to the Central
Government before making any transfer. [Section 108B]
3. The intimation
should be given in Form No. 7E [Section 108B and Rule 5B(2)] in triplicate
together with the relevant enclosures, addressed to the Secretary, Department
of Company Affairs, Ministry of Law, Justice & Company Affairs, Shastri
Bhavan, 5th Floor, "A" Wing, Dr. Rajendra Prasad Road, New Delhi‑
110 001.
4. Pay the fee of
Rs. 500/‑ as prescribed under Rule 513(4) by way of treasury challan at
any Government treasury or the Reserve Bank of India or any office of the State
Bank of India or its subsidiaries for credit.
5. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(2) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21‑6‑1996
(w.e.f. 21‑6‑1996). For account head and code please see Rule 22(2)
in Appendix 1.
6. If the
application fee is paid by way of demand draft then draw the demand draft in
favour of "Pay and Accounts Officer, Department of Company Affairs, New
Delhi", and payable at New Delhi.
7. Enclose the following documents along with the
intimation and its eleven copies:
(i) One certified true copy of the audited balance‑sheet
and profit and loss account of the company whose shares are proposed to be
transferred for each of the last three years;
(ii) One certified true copy of the latest balance‑sheet and
profit and loss account of your company as the transferor;
(iii) One certified true copy of the latest audited balance‑sheet
and profit and loss account of the transferee if it is a body corporate;
(iv) A treasury challan or bank draft evidencing the payment fee of
Rs. 500/‑ as prescribed by the Rules;
(v) Certified true copies of Board and General Meeting resolution
of your company;
(vi) A statement of value of assets of the company whose shares
proposed to be transferred for the last two years together with the basis of
valuation [see item 14(a) of Form 7E];
(vii) A
copy of approval under FEMA, if necessary [see item 19(a) of Form 7E]
8. The intimation must contain the following
statements, as required by Section 108B.
(i) Particulars
of the shares proposed to be transferred;
(ii) Name and address of the person to whom the share is proposed
to be transferred;
(iii) Shareholding,
if any, of the proposed transferee, in the concerned company;
(iv) Whether the transfer is through stock brokers and, if so,
indicate if the name of the transferee is or is not known;
(v) If the name of the transferee cannot be indicated, then write
that the transferor agrees to abide by any conditions that may be imposed by
the Central Government;
(vi) Whether
the purchase price is the price prevailing on the stock market.
9. If no response
from the Central Government is received within sixty days from the date of the
receipt of the intimation, then such transfer may be deemed to have been
approved. [Section 108B(5)]
10. Please note
that if the intimation is incomplete in any respect, the deficiency will be
pointed out to the applicant and the period of Sixty days will be counted from
the date on which such deficiency is rectified. [See Note (a) of Form 7E]
11. Intimation to
the Central Government is not necessary when the shares are transferred to a
scheduled bank as security against loan.
12. Note that if
the nominal value of shares proposed to be transferred is less than Rs. 10,000/the
information in respect of items 14(a), 14(b), 17(a) and 17(b) of Form 7E need
not be given.
13. Further note
that any body corporate which makes any transfer of shares without giving
intimation as aforesaid that body corporate will be punishable with fine of Rs.
50,000/‑.[Section 108‑1(2)(a)]
14. If any
contravention of any of the requirements of section 108B is made by a company
then every officer of that company who is in default will be punishable with
imprisonment for a term of three years or with fine of Rs. 50,000/‑ or
with both. [Section 108‑1(2)(b)]
15. If any person
transfers any share in contravention of the order of the Central Government
made under section 108B, he will be punishable with imprisonment for a term of
five years and will also be liable to fine. [Section 108‑1(4)(a)]
Topic 177
1. Verify the following before making the transfer:
(i) Whether you hold, whether alone or along with those under
same management as yours, ten per cent or more of the nominal value of the
equity share capital of the foreign company;
(ii) Whether the foreign company is owner of a dominant
undertaking within the meaning of section 2(d) of the MRTP Act, 1969;
(iii) Whether you want to transfer any such shares to any citizen of
India or to any body corporate incorporated in India;
(iv) Whether, as a result of such acquisition/transfer, the
acquiring body corporate or the foreign company will become owner of a dominant
undertaking within the meaning of section 2(d) of the MRTP Act, 1969.
2. If all the
above conditions are fulfilled, then you have to obtain the approval of the
Central Government before any such shares are transferred to any citizen of
India or to any body corporate incorporated in India. [Section 108C]
3. Make an
application to the Central Government in Form No. 7E of the General Rules and
Forms, 1956 in triplicate addressing it to the Secretary, Department of Company
Affairs, Ministry of Law, Justice and Company Affairs, Shastri Bhavan, New
Delhi‑ 110 001.
4. Enclose the following documents, along with the
application and its eleven copies:
(i) A certified true copy of the audited balance‑sheet and
profit and loss account of the foreign company for each of the last three
years;
(ii) A certified true copy of the latest balance‑sheet and
profit and loss account of the transferor;
(iii) A certified true copy of the latest audited balance‑sheet
and profit and loss account of the transferee in case it is a body corporate;
(iv) A treasury challan or bank draft evidencing the payment of Rs.
500/- as prescribed under sub‑rules (3) and (4) of Rule 5B of General
Rules & Forms, 1956;
(v) Certified
true copies of Board and General Meeting Resolution.
5. Pay the fee of
Rs. 500/‑ as prescribed under Rule 513(2) by way of treasury challan at
any Government treasury or the Reserve Bank of India or any office of the State
Bank of India or its subsidiaries for credit.
6. The
description of the Head of account of the treasury challan should be as
prescribed under Rule 22(2) of the Companies (Central Government's) General
Rules and Forms, 1956 and as amended vide GSR 251(E), dated 21‑6‑1996
(w.ef 21‑6‑1996). For account head and code please see Rule 22(2)
in Appendix 1.
7. If the
application fee is paid by way of demand draft then draw the demand draft in
favour of "Pay and Accounts Officer, Department of Company Affairs, New
Delhi", and payable at New Delhi.
8. Note that if
the nominal value of share proposed to be transferred is less than Rs. 10,000/‑,
the information in respect of items 14(a), 14(b), 17(a) and 17(b) of Form 7E
need not be given.
9. Further note
that any body corporate which makes any transfer of shares in a foreign company
in contravention of the requirements of section 108C that body corporate will
be punishable with fine of Rs. 50,000/‑.[Section 108‑1 (3)(a)]
10. If any
contravention of any requirements of section 108C is made by a company then
every officer of that company who is in default will be punishable with
imprisonment for a term of three years or with fine of Rs. 50,000/‑ or
with both. [Section 108‑1 (3)(b)]
Topic 178
DO YOU WISH TO MAKE CERTIFICATION OF
TRANSFER OF SHARES/DEBENTURES? [SECTION 112]
1. See that the
instrument of transfer is duly executed and accompanied by the share or
debenture certificate.
2. For checking proper execution of the instrument of
transfer, refer Topic 165.
3. Affix a rubber
stamp on the instrument of transfer saying that "Certificate Lodged"
along with number of shares/debentures, distinctive numbers of the
shares/debenture s for which such certification has been given.
4. After affixing
the rubber stamp, see that it is signed by the Secretary of the company or any
other person authorised by the Board of the company to that effect.
5. If your
company has a Committee of Directors to pass transfer or transmission of shares
or debentures, then present such cases of certification before the Committee
Meeting after calling a Committee Meeting and get them approved.
6. Maintain a
register giving in it details of such certification of transfer of shares or
debentures.
7. Check with the
register of members or debentures as soon as any instrument of transfer bearing
the certification is lodged or presented before the company.
Topic 179
DO YOU WISH TO DISPENSE WITH THE
PRESCRIBED TRANSFER FORM? [SECTION 108 (1C)]
1. Please note
that Section 108(1A) provides that every instrument of transfer of shares of a
company must be in Form No. 7B or in Form No. 7BB.
2. The aforesaid
prescribed transfer form must also be presented to the prescribed authority
(Registrar of Companies) who will endorse the date of presentation and then it
should be signed by or on behalf of the transferor and duly stamped and
presented to the company whose shares are to be transferred within two months
of the date endorsed by the prescribed authority.
3. Ensure that
for companies whose shares are listed with a recognised Stock Exchange, such
presentation is made within twelve months or any time before the date of
closure of the Register of Members, whichever is later.
4. Note that
exempti;n from the above requirements is given in certain cases under the
proviso to sub‑section (1) and also under sub‑section (IC) of
section 108.
5. It is
important to note that this exemption is given from the provisions of sub‑sections
(1A) and (1B) of section 108 and not from the provisions of subsection (1) of
section 108.
6. The exemption is available in the following cases
:-
(i) Where any share is held by a company in any other body
corporate in the name of a director or directors of that other company up to an
amount not exceeding the nominal value of the qualification shares which are
required to be held by a director of that company and where such
director/directors is/are appointed as nominee of the shareholder company.
[Section 108 (1C)(A)(i) read with Section 49(2)];
(ii) Where any share is held by any holding company in its
subsidiary in the name of its nominee(s) so that the number of members of the
subsidiary company do not go below seven members in the case of a public
company and two members in the case of a private company. [Section
108(1C)(A)(i) read with Section 49(3)];
(iii) Where shares are held by a corporation owned or controlled by
the Central Government or a State Government in any other body corporate in the
name of a director or a nominee. [Section 108(1C)(A)(ii)];
(iv) Where shares are held by a trust and a declaration has been
made to the Public Trustee and either the concerned company or the Public
Trustee stamps or endorses on the forrn of transfer (though not the prescribed
form) the date from which such shares will not be held in the name of the
director or nominee and it is delivered to the body corporate or the company in
whose shares the investment has been made, within two months of the date so
stamped or endorsed. [Section 108(1C)(A)(iii) read with Sections 153B and
187B]:
if-
(1) the company or corporation, as the case may be, stamps or
otherwise endorses, on the form of transfer in respect of such share, the date
on which it decides that such share shall not be held in the name of the said
Director or nominee or, as the case may be, in the case of any share in respect
of which any such declaration has been made to the Public Trustee, the Public
Trustee stamps or otherwise endorses, on the form of transfer in respect of
such share under his seal, the date on which the Form is presented to him, and
(2) the instrument of transfer in such Form, duly completed in
all respects, is delivered to the
(a) body corporate in whose shares such company or corporation
has made investment in the name of its Director or nominee, or
(b) company in which such share is held in trust, within two
months of the date so stamped or otherwise endorsed.
(v) Where the shares are deposited by any person by way of security
for any loan or advance or for the performance of any obligation with any of
the following :
(i) the
State Bank of India;
(ii) any
scheduled bank;
(iii) any
banking company;
(iv) any
financial institution approved by the Central Government;
(v) the
Central Government or a State Government;
(vi) any corporation owned or controlled by the Central or State
Government;
and the concerned bank, financial institution,
corporation or the Central or the State Government, as the case may be, stamps
or endorses on the form of transfer
(a) the
date on which the shares are returned to the depositor; or
(b) the date on which such shares are released for sale by any of
them (in case of depositor's failure to repay the loan or advance or to perform
the obligation); or
(c) the date on which the instrument of transfer relating to such
share is executed by it for registration in its own name;
and delivers the transfer form to the company
within two months of such date. [Section 108 (1C)(B)]
7. Please keep in
mind that where the instrument of transfer has been lost, and the transferee
makes an application which is stamped in the same way as if it were an
instrument of transfer, instrument of transfer can be dispensed with on such
terms as to indemnity as the Board of Directors of the company may impose.
[First Proviso to Section 108]
Topic 180
DO YOU WISH TO ENGAGE IN SCRIPLESS
TRADING?
1. Check whether
your company's shares are listed with OTC Exchange of India or whether your
company is a licence company under section 25 of the Act. [Rule 4(4) of the
Companies (Issue of Share Certificates) Rules, 1960]
2. Hold a Board
Meeting after giving notice to all the directors of the company as per section
286 of the Act and pass resolutions$ for issuing a jumbo share certificate in
favour of Custodian and also for issuing counter receipts to every allottee
with respect to their holding. [Rule 4(4) of the Companies (Issue of Share
Certificates) Rules, 1960]
3. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of Rs. 1000/- [Section 286(2)]
4. Keep in mind
that Custodian means an entity carrying on post trade activities such as
settlement of purchases and sales, information reporting safe keeping of
securities and/or participating in any clearing system for and on behalf of the
client to effect deliveries of the securities. [Explanation to Rule 4(4) of the
Companies (Issue of Share Certificates) Rules, 1960]
5. Also keep in
mind that the counter receipts issued by the Board of Directors of a company
whose shares are listed with OTC Exchange of India or which is a licenced
company under section 25, authorise the holder to exchange the same for share
certificates and vice versa at the option of the holder.
6. See that all
the transfer instruments are in the prescribed Form No. 7BB along with counter
receipts in the case of shares for which jumbo share certificate has been
issued to the custodian.
7. Also see that
all the transferred counter receipts bear the words "Transferred CR"
on the counter receipts.
8. As holder of
counter receipts, keep a record of the details of all transactions before
ending counter receipts for transfer, because the counter receipts will not
indicate the details of transactions.
9. Transfer upto
0.5% of the company's issued equity will be transferred immediately by the
Registrars concerned on receipt of the transfer deeds in Form No. 7BB along
with counter receipts from the Members or Dealers of the OTC Exchange of India
other transfers will be referred to the company concerned.
(Topic 181 to Topic 183)
Topic 181
DO YOU WISH TO FORFEIT SHARES?
1. Consult your
Articles of Association and proceed strictly in accordance with provisions
contained in them in this respect and in their absence take note of the
provisions of Regulations 29 to 35 of Table A of Schedule I to the Companies
Act, 1956.
2. Serve a notice
to the share‑holder whose shares will be forfeited requiring payment of
the due call money which is unpaid together with any interest accrued.
[Regulation 29 of Table A to the Companies Act, 1956]
3. The notice
must specify a day not earlier than the expiry of fourteen days from the date
of service of the notice, on or before which the payment must be made and if it
is not paid his shares will be forfeited. [Regulation 30 of Table A to the
Companies Act, 1956]
4. Call a Board
Meeting after giving notice to all the directors of the company as per section 286
and having completed all the formalities as mentioned in the Articles of
Association, pass necessary resolution to forfeit the shares.
5. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of upto Rs. 1000/‑ [Section 286(2)]
6. Pass necessary
entries in accounts and also record in the Register of Members and other
registers, the fact of such forfeiture.
7. Keep ready a
declaration in writing made by a director or manager or secretary of your
company stating that the shares are duly forfeited and see that such a
declaration is duly verified. [This will be the evidence against all persons
claiming title to the share or shares.]
8. Promptly
notify the Stock Exchange with which the shares of your company are listed
about such forfeiture of shares. [Clause 22(d) of the Standard Listing
Agreetnent]
9. Please also
keep in mind that if your company is a listed company and the investor fails to
pay call money within 12 months, the subscription money already paid may be
forfeited. [Clause 8.6.2(b) of the SEBI (DIP) Guidelines, 2000]
10. Note that if
your company's paid‑up share capital is less than Rs. 50 lakhs but is
equal to or more than Rs. 10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole‑time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the
company has issued shares and also forefeited some of those shares during the
financial year and complied with the provisions of the Act as per paragraph 19
of the Form of Compliance 4 Certificate appended to the Companies (Compliance
Certificate) Rules, 2001. [Section 383‑A(1) proviso]
Topic 182
1. See that the
Articles of Association of your company provide for selling forfeited shares.
[Regulation 32]
2. If the
Articles of Association are silent on this point, then alter the Articles of
Association accordingly vide Topic 26.
3. Convene a
Board Meeting after giving notice to all the directors of the company as per
section 286 and decide the terms and the manner of selling the forfeited shares
to others.
4. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable with fine
of upto Rs. 1000/- [Section 286(2)]
5. If the shares
of your company are listed on a recognised Stock Exchange then intimate the
Stock Exchange immediately after the aforesaid Board Meeting by letter or by
telegram if the Board Meeting is held outside the city, short particulars of
such selling of forfeited shares. [Clause 22(b) of the Standard Listing
Agreement]
6. Before selling
the forfeited shares, keep ready a duly verified declaration in writing signed
by the director, manager or secretary of your company stating that the shares
of the company have been duly forfeited on a particular date.
7. The aforesaid
declaration will serve as conclusive evidence against all persons claiming
title to shares forfeited and sold to others. [Regulation 34]
8. Show full
consideration, either by receipt or by adjustment, for the sale of forfeited
shares and execute the transfer of those shares in favour of the person to whom
shares are sold or disposed of. [Regulation 34(2)]
9. Register the
name of the transferee as the holder of those shares in the Register of
Members, of your company.
10. Deliver the
share certificates comprising those shares to the transferee who has now become
a member with the registration of his name in the Register of Members of the
company.
11. Note that if
your company's paid‑up share capital is less than Rs. 50 lakhs but is
equal to or more than Rs. 10 lakhs, your company is required to obtain a
Compliance Certificate from a secretary in whole‑time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the
company has issued shares and also sold some of those shares being forefeited
during the financial year and complied with the provisions of the Act as per
paragraph 19 of the Form of Compliance Certificate appended to the Companies
(Compliance Certificate) Rules, 2001.[Section 383‑A(1) proviso]
Topic 183
DO YOU WISH TO EXERCISE LIEN ON YOUR
SHARES?
1. Consult the
Articles of Association of your company to see whether they authorise the
company to exercise lien on the shares of your company. If they do not so
authorise, complete sproceedings to alter them accordingly, vide Topic 26.
2. Ensure that
your company is exercising lien on partly paid up shares and not on fully paid
up shares. [Regulation 9(1) of Table A of Schedule I]
3. Convene a
Board Meeting after issuing notices to the directors of the company as per
section 286 and pass a resolution allowing the board to exercise lien on the
shares.
4. Please keep in
mind that every officer of the company whose duty is to give notice of the
Board Meeting as aforesaid and who fails to do so will be punishable'with fine
of Rs. 1000/‑[Section 286(2)]
5. At the Board
Meeting table a list of the shares with their certificates and distinctive
numbers and the names of the holders of those share certificates and the number
of shares each shareholder is holding and the total number of shares on which
the lien is to be exercised.
6. Keep in mind
that company's lien on shares extends to all dividends payable on those
shares. [Regulation 9(2) of Table A of Schedule I]
7. Keep in mind
that members on whose shares lien has been exercised cannot exercise voting
rights in the general meetings of the company if such a provision is present in
the Articles of Association of the Company. [Section 181]
8. After passing
of the Board Resolution, inform the concerned members about the exercise of
lien of the company on their shares.
9. Also mention
the fact of exercising lien on the shares in the remarks column of the Register
of Members of the company in relation to the respective shares with the date of
the Board Resolution.