Sec. 206A provides that in case of share transfers pending registration, the dividend accruing on such shares shall be transferred to the ‘Unpaid Divi

Account’ unless the transferor authorizes the company in writing to pay the same to the transferee specified in the instrument of transfer. Further,

the company shall keep in abeyance, in relation to such shares, the offer of right shares and ‘bonus shares’ unless the transfer is duly registered in the

name of the transferee. The rule in this regard is that the transferor is a trustee of the transferee for such benefits and the transferee may file a suit against

the transferor to enforce his right. This section aims to protect the lawful right of the transferee pending registration by making it obligatory on

the part of the company to withhold payment of dividend.

.REFUSAL FOR TRANSFER

Q. 2. When can a com I) any refuse to register a transfer of shares? What are the remedies available to the aggrieved party when the trainer of shares

is wrongly refused by the company?

Ans. Shares of private company are not freely transferable. A private company, by its Articles restricts the transfer of its shares. However, shares of a

public company are freely transferable. The Articles of Association can restrict the right of transfer, but absolute restriction on the right of transfer, is ultra

vires the Companies Act. Usually the Articles empower the directors to decline transfer of shares. Where the transfer is against the. company law or

SEB1, or FEMA or any other law. Otherwise a public company cannot refuse the registration of transfer. Share transfer can be said to be against the

provisions of the company law or any other law in the following circumstances.:.

1. Where there is no proper instrument of transfer. Instrument of transfer should be in Form 7B. The transfer deed must be lodged for registration within its

validity period.

2. Where the instrument of transfer contains some apparent irregularity i.e. (i) transfer deed should be duly executed by the transferor and transferee

or by a person authorized on their behalf. (ii) Name, address and occupation

of the transferee must be specified on the deed. (iii) In case of joint holding, all joint holders must sign the deed and their signatures should be Witnessed.