# Transfer and Transmission of Securities
## Core Idea
Shares are property — they can move from one person to another either by a voluntary act (transfer) or by operation of law (transmission, e.g., death). Section 56 lays down the procedure and timelines for both.
## 1. Scope of Section 56
Applies to:
- Transfer of securities of the company, OR
- Transfer of interest of a member in a company with no share capital.
## 2. Transfer Procedure — Proper Instrument (SH-4)
A transfer must be executed using Form SH-4, which must be:
- Duly stamped, dated, and executed by both transferor and transferee (except for depository transactions).
- Include name, address, and occupation of the transferee.
- Delivered to the company within 60 days of execution, along with:
- Share certificate, OR
- Letter of allotment (if no share certificate yet).
## 3. Exemption to Government Companies
No instrument is required for certain transfers in Government companies:
- For bonds issued by the company, the transferee must inform the company along with the bond certificate.
- For securities held by government nominees (change of nominees).
Caveat: This exemption applies only if the government company has not defaulted in filing FS and Annual Returns with ROC.
## 4. If Instrument is Lost
If SH-4 is lost or not delivered within 60 days, the company may register the transfer on terms of indemnity as decided by the Board.
## 5. Notice to Transferee — Partly Paid Shares
If a transferor alone applies for registration of transfer of partly paid shares:
- The company shall not register the transfer unless:
- Notice (Form SH-5) is sent to the transferee, AND
- The transferee gives no objection within 2 weeks of receiving the notice.
## 6. Transmission [Sec 56(2)]
### Difference from Transfer
- A company can register transmission of rights without being bound by Sec 56(1) — no SH-4 needed.
- Transmission is allowed on receiving intimation from the entitled person.
### Cases of Transmission
| Event | Transmitted To |
|---|---|
| Death of holder | Legal representative |
| Insolvency | Official Receiver |
| Lunacy | Administrator appointed by Court |
## 7. Time Limit for Delivering Share Certificates
| Situation | Period |
|---|---|
| Subscribers to MOA | Within 2 months of incorporation |
| Allotment of Shares | Within 2 months of allotment |
| Transfer / Transmission | Within 1 month of receipt |
| Allotment of Debentures | Within 6 months of allotment |
| Specified IFSC Public and Private Companies (all securities) | Within 60 days after incorporation/allotment/transfer/transmission |
| Securities dealt in Depository | Immediate intimation of allotment to depository |
## 8. Direct Transfer by Legal Representative
A legal representative may transfer the deceased's securities without being the holder of those securities — provided the transfer is properly executed.
## 9. Default in Compliance
### Penalty
- Company and every officer in default: ₹50,000.
### Liability of Depository
If a depository or depository participant fraudulently transfers shares:
- Liable under Section 447 (fraud), AND
- Penalties under the Depositories Act, 1996.
## Memory Hook
- SH-4 = transfer instrument | SH-5 = notice to transferee
- 60 days to deliver instrument | 1 month for certificate after transfer/transmission
- 2 months subscribers/allotment | 6 months debentures
- Transmission = no instrument needed