# Transfer of Shares — Section 56

## Foundational Concepts

### Statutory Basis (Section 44)

Shares, debentures, or other interest of any member in a company are movable property transferable in the manner provided by the articles of association.

### Meaning of Transfer

Transfer of shares = voluntary conveyance of rights (and possibly duties) of a member — from a shareholder who wishes to cease being a member to a person desirous of becoming a member.

Shares are freely transferable like any other movable property, subject to express restrictions in the articles.

## Delivery of Certificates — Timelines

Every company shall, unless prohibited by law/court/tribunal order, deliver certificates within the following periods:

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

## Procedure for Transfer

### Step 1 — Instrument of Transfer (For Physical Shares)

A proper instrument of transfer, in the prescribed form, must be:

Duly stamped, dated, and executed by/on behalf of both transferor and transferee
Specifying name, address, occupation of transferee
Delivered to the company by transferor or transferee
Within 60 days from the date of execution
Along with the share certificate (or letter of allotment if no certificate exists)

> Demat shares do NOT require an instrument of transfer.

### Step 2 — Partly Paid Shares (Special Rule)

If the company receives an instrument for transfer of partly-paid shares from the transferor:

Company must give notice by registered post to the transferee
Register transfer only if no objection from transferee within 2 weeks of notice receipt

### Step 3 — Lost or Delayed Instrument

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

### Step 4 — Outcome

If transfer is registered: Share certificate must be issued within 1 month of registration.

If transfer is refused: Section 58 procedure applies.

## Punishment for Impersonation [Section 57]

If any person deceitfully personates as the owner of any security or interest and thereby:

Obtains/attempts to obtain such security or interest, OR
Receives/attempts to receive money due to such owner,

Punishment:

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

Worked example

### Example 1

Example 1 — Timeline Application:

Raj subscribed to the memorandum of XYZ Ltd, which was incorporated on 1 April 2026. By when must the company deliver share certificates?

Answer: Within 2 months from incorporation → by 31 May 2026.

### Example 2

Example 2 — Late Instrument:

A transfer deed was executed on 1 January 2026 but delivered to the company only on 15 April 2026 (over 60 days). What can the company do?

Answer: Since the instrument was not delivered within 60 days, the company may register the transfer on such terms of indemnity as the Board thinks fit.

### Example 3

Example 3 — Partly Paid Transfer:

A Ltd receives transfer deed for 1,000 partly paid shares from transferor on 1 March. What is the procedure?

Answer: Send notice by registered post to the transferee. If no objection within 2 weeks of receipt of notice → register the transfer.

### Example 4

Example 4 — Impersonation:

Mr. P forges signatures and obtains 5,000 shares belonging to a deceased shareholder.

Answer: Punishment u/s 57 — Imprisonment 1–3 years AND fine ₹1–5 lakhs.

⚠️ Common exam mistakes

Confusing the 60-day instrument-delivery period with the 1-month certificate-issue period — both apply but at different stages.
Forgetting that demat shares don't need an instrument of transfer.
Treating the partly-paid notice period as 2 months instead of 2 weeks.
Stating debenture certificate timeline as 2 months (it is 6 months).
Missing that Section 57 imposes BOTH imprisonment AND fine — the word is 'and', not 'or'.

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, or the interest of a member therein, in the case of shares held in physical form, 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.

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Transfer of Shares (Section 56)

Worked example

⚠️ Common exam mistakes