Director

Powers of the company law board

This section deals with the powers of the CLB to hear appeals against refusal to register transfers and transmissions in a private limited company.

Time to make the appeal within two or four months

The aggrieved person in the above case may appeal to the CLB for the time being (till national company law) tribunal starts exercising the power under section 111 against.

Section 111A

This section relates to a public limited company and the powers of a company also specified in the related section.

Section 111A not specifically provides for rectification of register of members and register of debenture-holders on grounds other than transfers/transmissions

Although section 111A does not specifically provide for rectification of the register of members and register of debenture-holders, the inclusion of sub-section (5) and other specified sub-sections of section 111 as equally applicable to section 111A makes it abundantly clear that section 111A also presupposes same remedy as in section 111 in respect of rectification of register of members and register or debenture-holders in respect of transmission and transfer which matters.

Lack of jurisdiction for CLB in terms of section 111A

The company law board held that its jurisdiction for rectification of the register of members of a private limited company did not cover grounds other than arising out of transfer of shares/debentures.

Refusal to register transfer from ex-employee set aside

Powers of the company law board

The CLB held that the ground on which the board of directors of the respondent-bank had refused registration was not governed by section 111A (3).

Free transfer of shares not applicable in private limited companies

It is provided in section 3 of the act that the articles of association in a private limited company shall contain, inter alia, a clause to restrict its right to transfer its shares. The transfer of shares and registration of a company makes unlisted shares of their profits.

Pre-emptive right

Following the clause in its Articles of Associations, it is usual for a private limited company to include in its articles a condition to the effect that sale of shares shall be between members at a fair price to be fixed by the directors.

Refusal to register transfers and rectification of register of members or debenture-holders

Although transfers in private limited companies are not expected to be as large in number and as complicated in public limited companies (both listed and unlisted) and for the same reason appeals for rectification, section 111 is more exhaustive in scope. This has happened because the exhaustive section 111, which applied to all companies prior to depositories act 1996 prior to 20-9-1995, after 20-9-1995, the provisions of section 111 came to apply only for private limited company.

Previous Approval of directors improperly done – transfer held invalid in a private limited company

The articles in the instant case require the previous sanction of the board for any share to their member or non-member and for every transfer of registration. The concept of previous approval of the director has been interpreted by the Supreme Court as under:

The concept of previous sanction of the directors connotes that there should be written resolution accepting the transfer in favor of the transferee.

Delay / Inaction by company to register transfers

The petitioner represented that he had purchased 100 shares before the company issued bonus shares in 1991 and due to companies mistake, the 100 shares originally purchased by the petitioner were not also registered in his name. The CLB ordered that as the original shares were purchased and lodged by the petitioner before the record date, it is the petitioner who is entitled to the bonus shares issued in 1991 and the subsequent bonus shares of 1994. The company was directed to rectify the register of members in respect of the bonus shares by inserting the name of the petitioner and issue duplicate share certificates by cancelling the original certificates after issue of notice to the transferor.

Transfer of debentures

For transfer of debentures a companies articles may contain a form or the company may follow a form similar to the form for transfer of shares. The transfer instrument for debentures is not subject to the period of validity in respect of shares.

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