Section 126 Right to dividend, rights shares and bonus shares to be held in abeyance pending registration of transfer of shares – Companies Act 2013

Amended and updated notes on section 126 of Companies Act 2013. Right to dividend, rights shares and bonus shares and transfer of shares.

Amended and updated notes on section 126 of Companies Act 2013. Detail discussion on provisions and rules related to right to dividend, rights shares and bonus shares to be held in abeyance pending registration of transfer of shares.

Chapter VIII (Sections 123127) of the Companies Act, 2013 (CA 2013) deals with the provisions related to declaration and payment of dividend. Section 126 of CA 2013 provides for right to dividend, rights shares and bonus shares to be held in abeyance pending registration of transfer of shares.

Recently, we have discussed in detail section 125 (Investor Education and Protection Fund) of CA 2013. Today, we learn the provisions of section 126 of Companies Act 2013.

Section 126 of the Companies Act, 2013 has been notified by the Ministry of Corporate Affairs (MCA) vide Notification No. S.O. 902(E) issued dated 27.03.2014. This notification shall come into force from 1st April, 2014 i.e. the commencement date of section 126 is 01-04-2014.

Name of ActThe Companies Act 2013
Enacted byParliament of India
Administered byMinistry of Corporate Affairs (MCA)
Number of Chapters29
Number of Sections484 (470-43+57)
Number of Schedules7
You are reading:
Chapter No.VIII
Chapter NameDeclaration and Payment of Dividend
Section No.126
Section NameRight to dividend, rights shares and bonus shares to be held in abeyance pending registration of transfer of shares
Monthly Updated EditionCompany Law PDF

Transfer the Dividend to Unpaid Dividend Account:

The amount of dividend shall be transferred to the Unpaid Dividend Account in relation to such shares of which the instrument of transfer is not registered by the company.

That means where any instrument of transfer of shares has been delivered to any company but the transfer of such shares has not been registered by the company, it shall transfer the amount of dividend to the Unpaid Dividend Account. For Unpaid Dividend Account, you may refer section 124 of the Companies Act, 2013.

An instrument of transfer of securities held in physical form shall be in Form No. SH-4 as given in Rule 11 of the Companies (Share Capital and Debentures) Rules, 2014. And every instrument of transfer with the date of its execution specified thereon shall be delivered to the company within 60 days from the date of such execution.

As per section 124 of the Companies Act, 2013, the company shall transfer the total amount of dividend declared but not paid or claimed to a special account to be called the Unpaid Dividend Account. However, the amount of such dividend shall be paid to the transferee specified in the instrument of transfer if the company is so authorised by the registered holder of such shares in writing.

Keep in abeyance the Rights Shares and Bonus Shares:

Any offer of rights shares u/s 62(1)(a) and any issue of fully paid-up bonus shares u/s 123(5) shall be kept in abeyance if any instrument of transfer of shares has been delivered but not registered by the company.

In accordance with section 62 of Companies Act, 2013, a company having a share capital may increase its subscribed capital by issue of rights shares to the holders of equity shares of the company by sending a letter of offer subject to the specified conditions.

Sub-section (5) of section 123 of the Companies Act, 2013 provides that a company may capitalize its profits or reserves for the purpose of issuing fully paid-up bonus shares.

Section 126 of Companies Act 2013: Right to dividend, rights shares and bonus shares to be held in abeyance pending registration of transfer of shares

Section 126 shall come into force on 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014.

Where any instrument of transfer of shares has been delivered to any company for registration and the transfer of such shares has not been registered by the company, it shall, notwithstanding anything contained in any other provision of this Act, —

  • (a) transfer the dividend in relation to such shares to the Unpaid Dividend Account referred to in section 124 unless the company is authorised by the registered holder of such shares in writing to pay such dividend to the transferee specified in such instrument of transfer; and
  • (b) keep in abeyance in relation to such shares, any offer of rights shares under clause (a) of sub-section (1) of section 62 and any issue of fully paid-up bonus shares in pursuance of first proviso to sub-section (5) of section 123


Open Demat Account

For Investing or Trading

(Best Investing and Trading Platform in India)

Learn More