Free Transferability of Shares in Public Companies

For the security of public companies, the essential feature is transferability. In the 2013 Companies Act, Section 44 states that the debenture or share or interests of the company’s members are changeable or moveable property. The securities of the interests of the company’s members are transferable. The transfer of shares is restricted in private companies. But in public companies, it is transferred freely.

In the company’s law, provisions contain that, in the public company, the transferability of shares is founded only on principle. The principle is that the company’s members or shareholders have the freedom to purchase or transfer shares. At the start, the share is transferred to companies only in physical mode.

However, most people think it is critical to think about whether the transfer of shares is important or not. This article will discuss the free transferability of shares in public companies. You may check the other related topics via online Law essay help UK.

What about legal provisions?

 The 2013 Companies Act, section 56 to 59, include detail about the legal provisions regarding the share transfer of a company. Moreover, some procedures or rulers are mentioned below regarding the transfer of shares for public companies.

  • Transfer instrument presented to public company
  • limited time for the issue of transfer certificate
  • Power to deny registration or appeal against this refusal
  • Non-compliance penalty
  • Legal representatives transfer securities
  • Shares transferred by repository with end to defraud

-Transfer instrument presented to public company

In the 2013 Companies Act, provision section 56 states that a company does not transfer or register a company’s securities until or unless a proper transfer instrument is properly stamped, executed or dated, or on the side of the transferor. Or will deliver this transfer to a public company with the security certificate. A security allotment letter is well presented if a certificate does not exist.

-limited time for the issue of transfer certificate

Section 56 states that unless provision law, court order, and other authority is prohibited, all companies will deliver the certificate of transferred shares in one month. Or they will deliver this certificate after the application registration for share transfer or debentures. So they have limited time to deliver the certificate of transfer shares.

-Power to deny registration or appeal against this refusal

Section 58 states that a public company can deny registration of share transfer securities due to definite cause. Or they also can appeal against this refusal.

-Non-compliance penalty

According to the 2013 Companies Act, in provision section 56, the company will get punished if any default is made with share transfer. It is a penalty for the companies. The punishment is in the form of a fine that is not less. In this way, the companies should remain careful in share transferring; otherwise, in the end, they will pay a fine.

-Legal representatives transfer securities

Companies Act 2013; section 56 states that legal representatives make the interest of a person or security transfer in a company. But sometimes, the legal representative does not have a hold. So it is valid he has held at the execution time of the transfer instrument. The legal representatives of the company transfer security of shares.

-Shares transferred by repository with end to defraud

Under the 1996 Depository Act, section 56, if depository members or any depository defraud any person by transferring the share. Then according to section 447, it will be liable for fraud, which is a very serious punishment.

The procedure of share transferring in a public company

Any public company that transfer share must follow a procedure. They must follow these procedure steps. These are:

  • In the form of SH-4, the act of share transferring should be properly executed by both the transferee and transferor.
  • The act of share transferring must follow stamp duty.
  • A person must give his name, signature, or address. Or provided the signatures of the transferee and transferor as a witness in the act of transfer.
  • For share transferring, the most important step is to must attach the allotment letter or certificate for the act of share transfer. Or it is also important to deliver only the genuine certificate to the company.
  • Within sixty days, the act of share transferring will be deposited to a public company. These days are from the execution date or by the side of the transferee or transferor.
  • After receiving these shares, the company’s board will consider the same. Or keep in order the documentation of the share transfer. Or then, this board will register these share transfers.

These are the important steps that public companies must follow to protect securities. Without these steps, the procedure of share transferring will not be complete.

The legality of restrictions on share transferring for public company

In 2013, the Companies Act with provision Section 2 included that a public company is a company that cannot ban the right of share transfer. The provisions of this act notified already or there forcibly come into the corresponding provisions of 1956, Companies Act.

Furthermore, in 2013, the Companies Act, Section 58 specified that the shares are transferable free for public companies. It is also included that, in provision Section 58, any agreement or contract between people for securities transfer is enforceable in the form of a contract.

Legal analysis of restrictions

According to recent judgments, or Companies Act 2013, the legality of restrictions for share transferring for mentioned below. These restrictions are summarized as: these are:

  • In a public company, if shareholders agree to restrict the share transferability, it will not infringe the legal mandate of shares transferability for this company.
  • The share transferability restrictions do not infract the articles of association of governing law or public company.
  • The agreement restricting the share transferability can be enforceable in the form of a contract against or amongst the shareholders participating in it.
  • This restriction of share transferability of a public company is not involuntary against a public company. Or it is when the company is not part of this agreement that includes these restrictions.

However, the share transferability is only free for a public company. But it s done by following a procedure. Some restrictions are also mentioned above that companies are following. You may also find more information related to law and restrictions of companies by reading different online blogs of academic writing firms that provide law essay writing services to help students.

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