Pre-Companies Act share transfers ok, says govt

Asks companies to carry out registrations, even if transfer executed under old regime

The ministry of corporate affairs (MCA) has clarified that share transfer forms executed before the Companies Act came into effect from April 1, can be accepted by companies.

A clarification had been sought on whether the transfer under the old Companies Act of 1956, would be valid in the new regime. Companies had refused to register the transfers on account of the same.

The government had received representations on the matter from industry bodies, professional institutions and other stakeholders; according to a MCA circular on the matter.

The move would ease share transfers held up on account of the change in the Companies Act regime, from the old one which was put in place in 1956; to the new one which came into effect in 2013. It would also allow companies to condone delays in applying for registration of share transfers after they were executed; provided that it was satisfied with the reason for any such delays.

The Securities and Exchange Board of India, which regulates the stock markets in the country, communicated the ministry's stance through a letter to exchanges on August 14. The BSE website carried a copy of the same on August 20.

"The matter has been examined and it is clarified that since transaction relating to transfer of shares is a contract between two or more persons/shareholders, any share transfer form executed before 1st April, 2014 and submitted to the company concerned within the period prescribed under relevant sections of the Companies Act 1956, needs to be accepted by the companies for registration of transfers," according to a communication from the ministry.

The circular went on to add that if the transfer form is not submitted within a prescribed period, the company could look to see if the delay is justified and if it decides not to accept the form, then reasons for the same are to be conveyed under the relevant sections.

Regulators clarify on share transfer norms:

*Shares transfers once executed, have to be registered by the company

*It was felt that share transfers executed during the old regime cannot be registered when the new Companies Act came into effect

*Industry bodies, and other organizations have made representations saying that many companies were refusing to register such share transfers

*Exchange notification now says companies can do so

*Notification cites a letter from Sebi, which received a communication from the MCA