Company Law Essay Help : Transfer of Shares
Cases referred to in this section
Nisbet v Shepherd (1994) 1 BCLC 300, CA
Re Fry, Chase National Executors and Trustees Corpn v Fry [1946] Ch 312, [1946] 2 All ER 106
Sayles v Blane (1849) 14 QB 205
A share is a chose in action and can therefore be given as a gift, sold, mortgaged or given as security in the same way as any other item of property. By Section 183, the company may register the transfer of a share on the receipt of a proper instrument of transfer (although 'proper instrument' merely means that it must be appropriate and suitable for stamping). Such an instrument is regulated by the Stock Transfer Act 1963, and this requires some basic information about the transaction to be provided. The instrument of transfer of shares must either be in accordance with the articles of association and be executed in the manner thereby prescribed or it must be a stock transfer, or in a common or usual form complying with the requirements as to execution and content which apply to a stock transfer. However, when the articles require the common form, registration of a transfer cannot be refused because it omits particulars which would be found in the common form but are in the circumstances immaterial - a share transfer form that failed to state the consideration to be paid and which had not been stamped was held to be valid, because it sufficiently recorded the transaction, was properly chargeable with stamp duty and therefore complied with Section 183 CA 1985 (Nisbet v Shepherd (1994) 1 BCLC 300, CA.
The articles of association usually require that shares shall be transferred in a form set out or in any usual or common form. Normally the transfer is required to be executed or signed by the transferor and, unless the share is fully paid, also by or on behalf of the transferee, and is not required to be by deed.
Until the instrument of transfer is registered, the transfer is not complete (Re Fry, Chase National Executors and Trustees Corpn v Fry [1946] Ch 312, [1946] 2 All ER 106); the transferor is the legal owner of the shares, and, if they are not fully paid, he is liable to pay all the calls made on them while his name remains on the register of members (Sayles v Blane (1849) 14 QB 205). A transferee who has accepted the transfer, although he has not executed it, is, however, liable to indemnify the transferor as from its date.
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