Chapter IV - Share Capital and Debentures
Section 56
Section 56: transfer and transmission of securities
A company may register a transfer of securities only on a proper, stamped and executed instrument of transfer delivered within sixty days, except for transfers between depository beneficial owners.
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This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) A company shall not register a transfer of securities of the company, or the interest of a member in the company in the case of a company having no share capital, other than the transfer between persons both of whose names are entered as holders of beneficial interest in the records of a depository, unless a proper instrument of transfer, in such form as may be prescribed, duly stamped, dated and executed by or on behalf of the transferor and the transferee and specifying the name, address and occupation, if any, of the transferee has been delivered to the company by the transferor or the transferee within a period of sixty days from the date of execution, along with the certificate relating to the securities, or if no such certificate is in existence, along with the letter of allotment of securities: Provided that where the instrument of transfer has been lost or the instrument of transfer has not been delivered within the prescribed period, the company may register the transfer on such terms as to indemnity as the Board may think fit. (2) Nothing in sub-section (1) shall prejudice the power of the company to register, on receipt of an intimation of transmission of any right to securities by operation of law from any person to whom such right has been transmitted. (3) Where an application is made by the transferor alone and relates to partly paid shares, the transfer shall not be registered, unless the company gives the notice of the application, in such manner as may be prescribed, to the transferee and the transferee gives no objection to the transfer within two weeks from the receipt of notice. (4) Every company shall, unless prohibited by any provision of law or any order of Court, Tribunal or other authority, deliver the certificates of all securities allotted, transferred or transmitted— (a) within a period of two months from the date of incorporation, in the case of subscribers to the memorandum; (b) within a period of two months from the date of allotment, in the case of any allotment of any of its shares; (c) within a period of one month from the date of receipt by the company of the instrument of transfer under sub-section (1) or, as the case may be, of the intimation of transmission under sub-section (2), in the case of a transfer or transmission of securities; (d) within a period of six months from the date of allotment in the case of any allotment of debenture: Provided that where the securities are dealt with in a depository, the company shall intimate the details of allotment of securities to depository immediately on allotment of such securities. (5) The transfer of any security or other interest of a deceased person in a company made by his legal representative shall, even if the legal representative is not a holder thereof, be valid as if he had been the holder at the time of the execution of the instrument of transfer. (6) Where any default is made in complying with the provisions of sub-sections (1) to (5), the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees. (7) Without prejudice to any liability under the Depositories Act, 1996, where any depository or depository participant, with an intention to defraud a person, has transferred shares, it shall be liable under section 447.
Introduction
Section 56 controls how a company registers transfers and transmissions and how quickly it delivers certificates. Transfers between persons both recorded as beneficial owners in a depository are outside the instrument requirement.
A default in complying with sub-sections (1) to (5) makes the company and every officer in default liable to a penalty of fifty thousand rupees, under the sub-section substituted in 2020.
Key takeaways
Instrument of transfer
Use the prescribed form, duly stamped, dated and executed by or for both parties, delivered within sixty days of execution.
Certificate timelines
Two months for subscribers and share allotments, one month for transfers and transmissions, and six months for debenture allotments.
Penalty
Default in complying with sub-sections (1) to (5) carries a ₹50,000 penalty for the company and each officer in default.
Prepare the instrument of transfer
The instrument must be in the prescribed form, duly stamped, dated and executed by or on behalf of the transferor and the transferee. It must state the transferee’s name, address and occupation, if any. Either party must deliver it to the company within sixty days from execution, with the certificate or, if none exists, the letter of allotment. If the instrument is lost or delivered late, the company may register the transfer on terms as to indemnity that the Board thinks fit.
G.S.R. 335(E) dated 4 May 2022 was made under section 56(1) and (3). It amended Form No. SH-4 in the Companies (Share Capital and Debentures) Rules, 2014 by adding a transferee declaration on Government approval under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. Use the current version of the form.
Transmission and partly paid shares
Sub-section (1) does not limit the company’s power to register a transmission by operation of law on receipt of an intimation. If the transferor alone applies to transfer partly paid shares, the company must give the transferee notice in the prescribed manner. It can register the transfer only if the transferee raises no objection within two weeks from receipt of the notice.
Deliver certificates on time
Unless prohibited by law or by an order of a court, Tribunal or other authority, deliver certificates within two months from incorporation for subscribers, within two months from allotment for shares, within one month from receipt of the instrument or intimation for transfers and transmissions, and within six months from allotment for debentures. Where securities are dealt with in a depository, intimate the details of allotment to the depository immediately on allotment.
Exemptions for Government and IFSC companies
G.S.R. 463(E) dated 5 June 2015 inserts two provisos into section 56(1) for a Government company. The requirement for a duly stamped instrument executed by or for both parties does not apply to bonds issued by a Government company if the transferee delivers an intimation of name, address and occupation, if any, with the bond certificate or, if none exists, the letter of allotment. Section 56(1) also does not apply to a Government company for securities held by nominees of the Government. Paragraph 2A, inserted by G.S.R. 582(E) dated 13 June 2017, makes these exceptions available only to a Government company that has not defaulted in filing its financial statements under section 137 or annual return under section 92.
G.S.R. 08(E) and G.S.R. 9(E), both dated 4 January 2017, add a proviso to section 56(4) for Specified IFSC public and private companies. Such a company must deliver the certificates of all securities to subscribers after incorporation, allotment, transfer or transmission within sixty days. Check the current text of these notifications, including any later amendments, before relying on an exemption.
Legal representatives and depository fraud
A transfer by a deceased holder’s legal representative is valid as if the representative had been the holder when the instrument was executed, even if the representative is not a holder. A depository or depository participant that transfers shares with intent to defraud a person is liable under section 447, without prejudice to liability under the Depositories Act, 1996.
Practical preparation
Check whether the transfer is depository-to-depository; verify the form, stamping, dating and execution; confirm delivery within sixty days with the certificate or allotment letter; give notice for transferor-only applications on partly paid shares; diarise the certificate delivery deadline.
Commencement and amendment record
Section 56 came into force on 1 April 2014 under S.O. 902(E). Section 9 of the Companies (Amendment) Act, 2020 substituted sub-section (6), replacing fines with a penalty of fifty thousand rupees. Under S.O. 4646(E), that change took effect on 21 December 2020.
Practical checklist
Do
- Check stamping and execution by both parties before lodging the transfer.
- Diarise the one-month certificate deadline from receipt of the instrument.
Avoid
- Do not register a transferor-only transfer of partly paid shares without notice to the transferee.
- Do not register a late or lost-instrument transfer without Board-approved indemnity terms.
Illustrative example
Hypothetical: late lodgement
A transferee lodges a duly stamped instrument seventy days after execution.
Spot the delay
Delivery is outside the sixty-day period in section 56(1).
Indemnity
The company may still register on indemnity terms the Board thinks fit.
Certificate
If registered, deliver the certificate within one month of receiving the instrument.
Outcome
- The transfer can proceed under the proviso to section 56(1), with the Board’s indemnity terms on record.
Glossary
- Transmission
- Passing of a right to securities by operation of law, such as on death, rather than by transfer.
- Instrument of transfer
- The prescribed transfer document required by section 56(1) for securities not transferred between depository beneficial owners.
Frequently asked questions
How long does the company have to issue certificates after a transfer?
One month from receipt of the instrument of transfer or intimation of transmission, unless prohibited by law or an order.
Is an instrument of transfer needed for demat transfers?
Section 56(1) excludes transfers between persons both of whose names are entered as beneficial owners in a depository’s records.
What is the penalty for default?
Under sub-section (6) as substituted in 2020, the company and every officer in default are liable to a penalty of fifty thousand rupees.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026