Section 56 Transfer and transmission of securities – Companies Act 2013

Amended and updated notes on section 56 of Companies Act 2013. Detail discussion on provisions and rules related to transfer and transmission of securities.

Amended and updated notes on section 56 of Companies Act 2013. Detail discussion on provisions and rules related to transfer and transmission of securities.

Chapter IV (Sections 4372) of the Companies Act, 2013 (CA 2013) deals with the provisions related to share capital and debentures. Section 56 of CA 2013 provides for transfer and transmission of securities.

Recently, we have discussed in detail section 55 (Issue and redemption of preference shares) of CA 2013. Today, we learn the provisions of section 56 of Companies Act 2013 read with the Companies (Share Capital and Debentures) Rules, 2014.

Section 56 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 was come into force from 1st April, 2014 i.e. the commencement date of section 56 is 1-4-2014.

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.IV
Chapter NameShare Capital and Debentures
Section No.56
Section NameTransfer and transmission of securities
Monthly Updated EditionCompany Law PDF

Section 56 of Companies Act 2013: Transfer and transmission of securities

Section 56 shall come into force on 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014.

(1) A company shall not register a transfer of securities of the company, or the interest of a member in the company in the case of a company having no share capital, other than the transfer between persons both of whose names are entered as holders of beneficial interest in the records of a depository, unless a proper instrument of transfer, in such form as may be prescribed, duly stamped, dated and executed by or on behalf of the transferor and the transferee and specifying the name, address and occupation, if any, of the transferee has been delivered to the company by the transferor or the transferee within a period of sixty days from the date of execution, along with the certificate relating to the securities, or if no such certificate is in existence, along with the letter of allotment of securities:

Provided that where the instrument of transfer has been lost or the instrument of transfer has not been delivered within the prescribed period, the company may register the transfer on such terms as to indemnity as the Board may think fit.

(2) Nothing in sub-section (1) shall prejudice the power of the company to register, on receipt of an intimation of transmission of any right to securities by operation of law from any person to whom such right has been transmitted.

(3) Where an application is made by the transferor alone and relates to partly paid shares, the transfer shall not be registered, unless the company gives the notice of the application, in such manner as may be prescribed, to the transferee and the transferee gives no objection to the transfer within two weeks from the receipt of notice.

(4) Every company shall, unless prohibited by any provision of law or any order of Court, Tribunal or other authority, deliver the certificates of all securities allotted, transferred or transmitted—

  • (a) within a period of two months from the date of incorporation, in the case of subscribers to the memorandum;
  • (b) within a period of two months from the date of allotment, in the case of any allotment of any of its shares;
  • (c) within a period of one month from the date of receipt by the company of the instrument of transfer under sub-section (1) or, as the case may be, of the intimation of transmission under sub-section (2), in the case of a transfer or transmission of securities;
  • (d) within a period of six months from the date of allotment in the case of any allotment of debenture:

Provided that where the securities are dealt with in a depository, the company shall intimate the details of allotment of securities to depository immediately on allotment of such securities.

(5) The transfer of any security or other interest of a deceased person in a company made by his legal representative shall, even if the legal representative is not a holder thereof, be valid as if he had been the holder at the time of the execution of the instrument of transfer.

(6) Where any default is made in complying with the provisions of sub-sections (1) to (5), the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.

(7) Without prejudice to any liability under the Depositories Act, 1996, where any depository or depository participant, with an intention to defraud a person, has transferred shares, it shall be liable under section 447.

Exception/ Modification/ Adaptation:

1) In case of Government company – In Sub-section (1) of Section 56, after the proviso, the following provisos shall be inserted, namely:

Provided further that the provisions of this sub-section, in so far as it requires a proper instrument of transfer, to be duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee, shall not apply with respect to bonds issued by a Government company, provided that an intimation by the transferee specifying his name, address and occupation, if any, has been delivered to the company along with the certificate relating to the bond; and if no such certificate is in existence, along with the letter of allotment of the bond:

Provided also that the provisions of this sub-section shall not apply to a Government Company in respect of securities held by nominees of the Government. –Notification No. G.S.R. 463(E) dated 5th June, 2015.

2) In sub-section (4) of section 56, after the proviso, the following proviso shall be inserted, namely: –
“Provided further that a Specified IFSC public company shall deliver the certificates of all securities to subscribers after incorporation, allotment, transfer or transmission within a period of sixty days.”. –Notification No. G.S.R. 08(E) dated 4th January, 2017.

3) In sub-section (4), after the proviso, the following proviso shall be inserted, namely: –
“Provided further that a Specified IFSC private company shall deliver the certificates of all securities to subscribers after incorporation, allotment, transfer or transmission within a period of sixty days.”. –Notification No. G.S.R. 09(E) dated 4th January, 2017.


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