Wednesday, December 9, 2009

The Law Relating to Transfer of Shares

The stock market has become the backbone of many economies in the world. Unfortunately, those who are engaged in such markets know little or nothing on the that regulate their trading. One of the very critical areas that every investor must know is the laws that govern the transfer of shares by a company and also individuals.

There is a distinction between transfer of shares and the transmission of shares. A transfer is by the act of the member of a company, while transmission occurs by operation of the law on the death or the bankruptcy of a member.

Every shareholder has a right to transfer his or her shares unless otherwise provided in the articles. As per the companies Act, "it is provided that the shares in a company under these Acts shall be capable of being transferred in a manner provided by the regulations of the company. Such regulations of the company may impose restraints upon the right of transfer...."

However, the directors of a company may, in their absolute discretion and without assigning any reason therefore, refuse to register any transfer of share. In such a case, the court may not interfere with the transfer unless one shows that the directors are exercising their discretion improperly.

A forged transfer of shares is a nullity and cannot affect the title of the shareholder whose signature is forged. If the company therefore has registered the forged transfer and removed the true owner of the rights from the register, it can be compelled to replace him.

Sources: I. Videos Gone Viral, II. The Car Junky, III. The Tech Fanatic


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