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According to the new Companies and Allied Matters Act, , a shareholder is prohibited from transferring their shares to a non-member of the company without first offering the same shares to the existing shareholders of the company, except the company's Articles of Association state otherwise. If a shareholder transfers all its shares to the purchaser, the shareholder divests its entire interest in the company shares and ceases to be a shareholder of the company. However, if only part of the shares is transferred, the shareholder divests its interest in the number of shares that have been sold but remains the holder of the unsold shares.
Any party that holds shares in a company can transfer shares to another subject to any share transfer restriction provided in the Articles of the company. A shareholder is an individual or entity that holds at least one share in a company. Under the law, a minor can be a shareholder of a company, but it is unlikely for a minor to enter a binding contract for the sale or transfer of their shares as they cannot enter binding contracts.
A proxy or agent representing a shareholder can, through a Power of Attorney , enter a binding contract to sell and transfer the shareholder's shares to another party. A company may restrict the transfer of shares by including a right of first offer clause in its Articles of Association.
This clause requires that a shareholder who intends to sell its shares should notify the existing shareholders in writing first to allow them to purchase the transfer shares. If the existing shareholders refuse to buy the transfer shares, the shares can be sold and transferred to third parties. In addition to this, the shareholder will also submit its share certificate to the company. Upon the deposit of the share transfer form and Share Certificate , the company will register the transfe r and issue only one new share certificate to the new shareholder.
The selling party automatically ceases to be a shareholder of the company as the name of the shareholder is removed from the register of members of the company. When a shareholder decides to transfer part of its shares in the company and not the entire shares, the shareholder is required to sign a Share Transfer Form , stating the number of shares they are transferring and the purchase price.
The shareholder will then deliver the share transfer form together with the shareholder's share certificate to the company. The company will register the purchaser as a shareholder of the company. Upon registration, the company will issue a new share certificate reflecting the transfer shares to the purchaser the new shareholder and another share certificate to the shareholder whose shares have been transferred.
After completing the transfer, the company is should notify the Corporate Affairs Commission and file form CAC 2A Return of Allotment together with the following documents:. Vivian Umelue is an attorney and legal templates programmer at Wonder. Legal and is based in Nigeria. Back to top. Unlike the task of transferring shares which does not require immediate communication with the Registrar of Companies, issuing new shares does require notification to be given.
This is carried out utilising the Form SH01, Return of Allotment of Shares which depicts the numbers and classes of new units being draw and the subsequent effects on the overall statement of capital of the company. The Annual Return either completed straight after or at the usual time then reconciles with the SH01 and lists the total number of shares and their resultant ownership. Both transferring and issuing new shares results in the new holder being provided with an official share certificate which signifies their ownership of the stock in the company.
This can presented to a bank or other third party or institution as evidence of their interest in the company and whether or not they have a controlling or minority stake. Download Form SH01 here. When considering the options for issuing an increased number of shares at the time of company registration to cater for the eventuality that new shareholders will materialise or opting initially for a reduced number and then making fresh issues as and when necessary, there are some important considerations to be borne in mind.
The absence of stamp duty might be attractive to potential investors where a new allotment will take place whereas a reduced number of shares at the inception of the company might portray it as being small and underfunded. Also, once shares are allotted at whatever stage , they create an immediate liability towards the company which the person holding them must avail themselves of by paying their nominal or market value, whichever is higher.
Recent Events Affecting Shares The abolition of authorised share capital has made the decision of how many shares to issue when registering a company more acute. Transferring Shares - Stock Transfer Form Shares in private limited companies and those which are public can be transferred from one owner to another using a stock transfer form.
Scenario:1 Scenario:2 Scenario:3 Scenario:4 Number of shares in existence before the issue: 1 10 Number of shareholders after the issue: 2 2 3 5 Percentage of shares to be held after issue: Number of shares which could be issued to satisfy the requirement: 1 90 Total number of shares in issue on completion: 2 Company Registration Number: I accept cookies from this site. Feedback :. Transferring Shares vs Issuing New Shares.
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Trade now. AAPL GOOG TSLA Securities What are securities? Transfer of shares refers to the intentional transfer of title of the shares between the transferor one who transfers and the transferee one who receives. The shares of a public company are freely transferable unless the company has a valid reason to disallow the same.
The shares of a private limited company are not transferable subject to certain exceptions. A transfer deed is executed for the transfer of shares. Transmission of shares takes place due to the operation of law that is when the holder is no more or has become lunatic or insolvent. It can also take place when the holder of shares is a company, and it has wound up. There is no transfer deed executed, and the transferee will be given the rights to the shares, and the transmission is recorded only when the transferee gives proof of entitlement to the shares.
In case of the death of the holder the shares, it will be transferred to the legal representative and in case of insolvency to the official assignee. The following table illustrates the differences between the transfer of shares and transmission of shares:. It has to be delivered to the company by either parties within 60 days from the date of execution along with a certificate of securities or letter of allotment of securities as available. It will be affected when the application of transmission of shares along with relevant documents is valid.
Execution of transfer deed is not required. The following are the relevant documents for the transmission of shares. Every company must deliver the certificates of all securities transferred or transmitted within 1 month from the date of receipt of the instrument of transfer in case of transfer or intimation of transmission as applicable unless prohibited by any provision of law or any order of Court, Tribunal, or other authority.
Where any default is made in complying with the above, the company shall be punishable with a fine not be less than Rs. While the transfer of shares and transmission of shares intend a change in ownership of the title of the shares, the distinction lies in the fact that the transfer of shares is voluntary and initiated by the transferee or transferor while transmission of shares is operational by law and is initiated by the legal representative or receiver.
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