# Transfer of Shares (Section 56)

## Conceptual Foundation

Section 44: Shares, debentures, or other interest of a member are movable property, transferable in the manner provided by the articles of the company.
Section 56: Deals with transfer and transmission of securities or interest of a member.

## Meaning of Transfer

Transfer of shares = voluntary conveyance of rights (and possibly duties) of a member from a transferor (who wishes to cease being a member) to a transferee (who desires to become a member).

## Delivery of Share Certificates — Time Limits

Situation	Time Limit
Subscribers to memorandum	Within 2 months from date of incorporation
Allotment of any shares	Within 2 months from date of allotment
Transfer or transmission of securities	Within 1 month from date of receipt of instrument of transfer / intimation of transmission
Allotment of debentures	Within 6 months from date of allotment

## Procedure for Registration of Transfer

### Step 1 — Instrument of Transfer

A proper instrument of transfer in prescribed form must be:

Duly stamped, dated, and executed by/on behalf of both transferor and transferee (except for shares in Demat form);
Specifying name, address, and occupation of transferee;
Delivered to company within 60 days from date of execution;
Accompanied by the share certificate (or letter of allotment if no certificate exists).

### Step 2 — Partly Paid Shares Special Rule

If the company has received instrument of transfer of partly paid shares:

Company shall give notice by registered post to the transferee;
Register transfer only if no objection is received from transferee within 2 weeks from date of receipt of notice.

### Step 3 — Lost / Delayed Instrument

Where instrument of transfer is lost or not delivered within prescribed period, the company may register transfer on such terms as to indemnity as the Board may think fit.

### Step 4 — Outcome

Company either:

Registers the transfer → issues share certificate within 1 month of registration, OR
Refuses to register → triggers Section 58 procedure.

## Punishment for Impersonation (Section 57)

If any person deceitfully personates as owner of any security/interest and obtains/attempts to obtain such security or money due to such owner:

Imprisonment: Minimum 1 year up to 3 years
AND
Fine: Minimum ₹1 lakh up to ₹5 lakhs

Worked example

### Example 1

Example 1 — Time Limit for Transfer Certificate: Mr. A transfers his shares in XYZ Ltd. to Mr. B. The instrument of transfer is received by the company on 15 May. The company must deliver the new share certificate to Mr. B within 1 month, i.e., by 14 June.

### Example 2

Example 2 — Partly Paid Shares: PQR Ltd. receives a transfer instrument for partly paid shares to Mr. Y on 1 June. The company must send registered notice. If Mr. Y raises no objection within 2 weeks (by 15 June), only then will the transfer be registered.

### Example 3

Example 3 — Lost Instrument: Mr. P submits a duly executed transfer deed but it gets lost in transit. The Board, satisfied with indemnity furnished, may register the transfer despite the missing instrument.

### Example 4

Example 4 — Impersonation: Mr. R falsely impersonates Mr. S and obtains a dividend warrant of ₹50,000. Mr. R is punishable with imprisonment of 1–3 years AND fine of ₹1–5 lakhs.

⚠️ Common exam mistakes

Confusing the 60-day rule (delivery of instrument to company) with the 1-month rule (delivery of certificate by company).
Forgetting the special 2-week notice procedure for PARTLY PAID shares.
Assuming demat shares need stamped physical instruments — they do not.
Mixing up time limits — debentures get 6 months for certificate, shares get 2 months on allotment.
Treating impersonation as only a fine offence — imprisonment is mandatory (1–3 years).

Bare-Act text Section 56 & Section 57 · Companies Act, 2013 · click to expand

Section 56(1) — A company shall not register a transfer of securities of the company 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.

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Transfer of Shares — Procedure & Delivery of Certificates (Section 56)

Worked example

⚠️ Common exam mistakes