Commentary Part 21: Certification and Transfer of Securities Chapter 1: Certification and Transfer of Securities: General Section 771: Procedure on transfer being lodged
1092.Under section 183(5) of the 1985 Act, if a company refuses to register a transfer of shares (or debentures), it must, within two months of receipt of the transfer, send to the transferee notice of its refusal to register the transfer of shares. Such a refusal will not affect the transferee’s beneficial interest in a share, for example, he will still be entitled to any dividend declared on that share, and a return of capital on winding-up, but the transferee will not be able to exercise all of the rights of a member of the company, for example, he may not vote at meetings, until such time as the transfer is registered and his name is entered in the register of members.
1093.Section 771 is a new provision which amends the law on the registration of transfers. As recommended by the CLR, it requires the directors to either register a transfer of shares or debentures or provide the transferee with reasons for their refusal to register (see Final Report, paragraphs 7.44 and 7.45).
1094.In either case, this must be done as soon as practicable, but in any event within two months of the transfer being lodged with the company.
1095.Under subsection (2), where the directors refuse to register the transfer of a share, the transferee is entitled to receive such information as he may reasonably require regarding the reasons for the directors’ refusal to register the transfer. Such information does not extend to minutes of meetings of the directors.
1096.Where a company fails to comply with this section, the company and every officer of the company who is in default commits an offence (see subsection (3)).
1097.Subsection (5) makes it clear that this section does not apply to a transfer of shares if the company has issued a share warrant in respect of the shares under section 779 or in relation to a transmission of shares by operation of the law (for example, where a bankrupt member’s trustee in bankruptcy or a deceased member’s personal representative becomes entitled to shares).