lawfully register a transfer

1. Transfer to be in the prescribed form. Shares may be transferred by executing an installment of transfer (called ‘transfer deed)’ duly stamped and signed

by the transferor and transferee. The instrument must specify

the name, address and occupation of the transferee. The instrument of

transfer Hurst be in the prescribed Form. Before it is signed by or on behalf of the transferor and before any entry is made therein, it shall be presented to

the prescribed authority for stamping or endorsement of the date on which it is presented. Without such stamping or endorsement the Fonn cannot be

lodged with the company.

2. Execution of trimester deed. After stamping or endorsement of the date of presentation on the Form and its execution by the transferor and transferee,

every such Form must be delivered to the company’s head office along with the share certificate aI:1d where share certificate has not been issued, along

with the letter of allotment-.

the date of registration of transfer. From this date, the transferor loses all his future rights as to receive dividend, voting, and all future liabilities including

the liability to pay future calls.

No Need of Excluding Transfer Deed [Sec. 108 (3»). Where both transferor and transferee avail the services of delJOsitory. the procedural requirements

associated with the transfer of securities shall not apply to such transfer, since there is no need of executing a transfer deed.

Explain the legal position of transferor and terms free pending registration of transfer by the company.

When a shareholder transfer his shares to another person, the transferor or transferee may send the share certificates along with transfer deed duly filled

in, to the company for registration. The transfer takes effect as soon as it is registered with the company in the name of transferee. The name of the

transferor is struck off from the register of members and the name of transferee is entered in the register of members. During tendency of registration,

the rights and liabilities of transferor and transferee are as follows

When a member transfers his shares, he transfers all his rights and obligation as a shareholder as from tlui date of transfer. The transferor does not

transfer the rights as to dividend and bonuses already declared, nor does he transfer my liability for calls already ade and remain unpaid. However, he

transfers all his rights and obligations as to future dividend and bonuses and also the liability for calls not yet made. The legal effect of transfer is from the

date the transfer is registered. and the transferee’s name is put in the books of the company as the owner of the shares. Therefore, till the transfer of

shares is duly registered with the company, the transferor remains the owner of such shares and is entitled for dividend and bonuses declared before

registration of transfer and is also liable for unpaid class, if any.

So far as tile transferor and transferee inter-se, are concerned, tile transfer takes effect immediately on tile execution of proper transfer deed. During

tendency of registration, the equities exists between them but not between the transferee and the company. Thus, the effect of transfer of shares, before

its registration, as regards the rights and liabilities of tile transferor and the transferee, the transferor against future calls paid by him against his shares

from the date of transfer. (Spencer vs. Ashworth Parting & Co.) and the transferor; on the other hand he must hand over the dividend, bonus or other

amounts received from the company on such transferred shares after the transfer of shares to the transferee. The parties may agree on any terms

contrary to the above provisions.

As regards position of transferor, the provisions of Sec. 27 of the Securities (Contracts and Regulation) Act 1956, lays down that it shall be

lawful for tube person whose name appears in the Register of Members as tbe holder of shares, to receive and retain any dividend declared by the

company even after the transfer of shares to the transferee for consideration. But, if the transferee has lodged the shares and all other documents relating

to transferor to the company within 15 days from the date on which dividend became due, the transferee can claim such’ dividend declared by’ the

company.

Dividend cheque dividend warrant shall be delivered to the first named joint holder.

Voting Power. In the case of joint holders, the vote of the.

senior who tenders a vote. whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders. For this purpose,

seniority shall be determined by the order in which the names stand in the register of member (Regn. 57). A requisition of general meeting signed by one

or some of the joint holders shall be valid or if it is signed by all.

(VI) In the case of a public company every joint shareholder is counted as a separate member (Naraindas Man Mohandas Ramji & Sons v..’. Indian

Manufacturing Co. Ltd.) but in the case of private company joint holders are treated as a single member [Section 30) (iii)).

(vii) Transmission of Shares. On deatll of a joint holder, tile survivor or survivors shall be the only persons recognised by the company as having title or

interest in the shares. However, the estate of a deceased joint holder shall remain liable for any liability in respect of shares. [Article 25).

6. Foreigners. A foreigner may become a member of the company with the general or special permission of the Reserve Bank of India under tile Foreign

directors and promoters remain the same in the case of” offer for sale to public

The responsibility of the .;company, its directors and promoters remain the same in the case of” offer for sale to public” by an Issue House, as that in the case of direct issue of prospectus by a company.” Offer to the public”. “Offer to the public” is an important condition as per Section 2(36) which decides whether a document is a prospectus or not. It is difficult to say exactly how many persons constitute “the public”. Any number from two to infinity; perhaps even one, may serve to indicate pubic. The ‘public’ is of course a general word. No particular number is prescribed. Section 67 of the Companies Act clarifies the position and states that “public” includes any section of the public, however selected.

For example, if a document inviting persons to buy shares is issued, to all teachers, or to all students of Science, or to all the clients of a particular share broker or to all the shareholders of a company concerned, it is still issued to “the public” and therefore is a prospectus.

However, there are circumstances when an offer or invitation for shares, though made to a section of the public, will not be deemed to be made to them. According to Section 67(3), no offer or invitation shall be made to the public if (i) Where the invitation is restricted to those who are receiving the invitation and non-else; (ii) where the offer is made to a few friends of directors or (iii) it is a domestic concern of those making or receiving the offer or invitation.

doctrine of indoor management is an exception to the rule of constructive

The doctrine of indoor management is an exception to the rule of constructive notice. Memorandum of Association and Articles of Association are supposed to be filed with the Registrar of Companies at the time of incorporation. Registrar's office being public office, any person interested in knowing the contents of these documents can ask fOI the same and inform himself. Therefore, a person dealing with a company is deemed to have knowledge of the Memorandum and the Articles of Association of the company. So, if he enters into a transaction with the company which.is ultra virus the Memorandum or Articles, he cannot treat the transaction as binding on the company. On the other hand, if the transaction appears to be a
proper one, when compared with the Memorandum and Articles, it would be grossly unfair if the company could escape liability under it by showing that there was some irregularity in the conduct of the company's affairs leading upto the transaction, when the other party did not know of the irregularity and had no means of discovering it.
This rule has been described by Lord Hatherley as the 'Doctrine of Indoor Management'. According to this doctrine, while persons dealing with the company are bound to read the registered document, and to see that the proposed dealing is not inconsistent therewith; they are not bound to do more, they need not inquire into the regularity of the internal proceeding and may assume that all is being done regulary.
Palmer's Compmy Law. The doctrine of constructive notice prote(;LS the company against outsiders, the Doctrine of Indoor Management seeks to protect outsiders against the company.

Legal Formalities. Incorporation of a company under the Companies Act

1. Legal Formalities. Incorporation of a company under the Companies Act requires observance of various legal formalities which are not only
cumbersome and complex, but also time consuming and expensive. These legal formalities make incorporation a difficult task.
2. Excessive Legal Regulation. Even after incorporation, a company has to comply with innumerable regulations and instructions provided under the
Companies Act and other related Acts, while carrying on its activities. It has to obtain approyal and sanction of various authorities for certain Acts.
Moreover, it has to strictly follow the provisions of the Act in all matters relating to issue of capital, appointments, meetings, managerial remuneration,
investments and borrowing, declaration and payments of dividends, maintenance of books, filing of documents, etc.
\.30 Excessive Government Regulations. Because oftheir great impact on the social and economic welfare ofthe country, incorporated companies are
subject to severe government regultions and control under the different laws like the Companies Act, M.R.T.P. Act, FEMA, etc. But such rigid control and
regulations tend to cripple the initiative and enterprise of the management for efficient performance of the companies activities.
4. Loss of Privacy. Another demerit of a incorporation is the loss of privacy. A public company will have to publish its constitution, directorate, capital
structure, charges on its assets, proceedinof geI1eral meeting and final accounts, etc., by filing prescribed documents with the Registrar of Companies.
5. Divorce between Ownership and Control. After incorporation a large number of persons join their hads as members in a company but all of them
cannot take active part in the management of the. company. The effective powers of management are exercised by the directors who are the, elected
representatives of the shareholders. There is a virtual divorce between ownership and management. As a result wastage and inefficiency creeps in the
management of a company.
6. Greater Tax Burden. In certain cases, the tax burden on an incorporated company is greater than unincorporated companies, firms, etc.
7. Complicated Winding-up Process. An unincorporated body can be dissolved or wound up speedily, since it does not involve any complicated legal
process. But in the case of incorporated companies, detailed and complicated statutory provisions have to be complied with for winding up, which are both

time consuming and expensive.