Section 56 of CA 2013 : Section 56: Transfer And Transmission Of Securities

Explanation using Example

Imagine Sarah wishes to sell her shares in ABC Ltd. to John. They agree on the sale and Sarah signs a share transfer form and gives it to John along with her share certificate. John now must submit the transfer form and share certificate to ABC Ltd. within 60 days for the transfer to be registered. If John fails to submit these within 60 days due to, say, misplacing the documents, ABC Ltd. may still register the transfer if John provides an indemnity bond as a form of security.

In another scenario, if Sarah had passed away, her legal heir, Emma, could transfer the shares to herself by providing evidence of her entitlement (like a probate of will). ABC Ltd. would then register the transfer without requiring Emma to be an existing shareholder.

Furthermore, if Sarah had only submitted the transfer application without involving John, and the shares were partly paid, ABC Ltd. would need to notify John about the transfer. If John does not object within two weeks, the transfer can proceed.

Lastly, if ABC Ltd. fails to issue a share certificate to John within one month of receiving the transfer documents, the company and its responsible officers may face a penalty of fifty thousand rupees.