4.5 Transfer and transmission

Transfer of shares

• The shares or other interest of a member in a company are movable assets and are transferable in the manner prescribed under the Act and the Articles
• The articles of a public limited company may and those of a PVC must restrict the right of transfer. Thus a member cannot be prohibited from transferring his shares as this is a statutory right which cannot be taken away by articles.
• The directors may however decline to register the transfer of shares to a person of whom they shall not approve or share on which the company has a lien.

Contract of Transfer

This is a contract by which a shareholder undertakes to transfer his shares or a contract in which the transferor agrees to sell while the transferee agrees to buy the shares. The following terms are implied in a contract of transfer.

1. The transferee will pay the price and that the transferor will hand over to him genuine instruments of transfer and the share certificate.
2. The transferor will do nothing to prevent or delay the transferee from having the transfer registered.
3. That the transferee will indemnify the transferor from any loss or liability which may arise in respect of the shares.
4. That the share certificate carries the rights and interests which it purports to convey.

Once the contract has been entered into the rights and interests which it purports to convey, holds them until registration as a trustee for the transferee.

Transmission of shares
Transmission means the transfer of property or title in the shares by operation of law. It takes place by the
death, bankruptcy or insanity of a member or if the member is a limited liability company, on its going into
liquidation.
Section 501 provides that the company must accept as evidence of representation, any document which by
law is sufficient evidence of letters of administration. A person entitled to any shares by transmission still
has the same rights as to dividends and other privileges carried by the shares as if he was the original owner
of the shares except that he cannot exercise any right as a member at a general meeting of the company.

The following steps are necessary in respect of the transmission of share:
a) The company secretary should obtain the correct documentation and check it thoroughly the relevant
share certificate should also be submitted.
b) The company secretary should endorse the fact of the documentation upon appropriate company
records.
c) If a representative wishes the shares to be transferred into his own name a letter requesting this should
be sent to the company.