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TRANSFER OF SHARES

The nature of share or other interest of a member in a company is personal


property and trasferable in accordance with Section 105. Shares are chose in
action, where the it has right to sue, an intangible personal property protected by
law. Therefore, the purchaser of shares has his right to transfer his shares when
and to whom he pleases.
In CA 2016, Section 42(2) requires a private company to restrict shares. The
restriction can take various form such as rights of pre-emption rights clause where
a member wishing to transfer must first offer to the existing directors or members,
the transfer of shares subjected to the discretion of directors or members, or the
shares can be transferred to only members of particular family or clan.
The restriction on the transfer of shares must be expressly, clear and unambigious.
In the case Greenhalgh v Mallard, the restriction must be clear to make it apperant
that was the intention. It also must be construed in favour of the shareholder to
transfer the shares. In Re Smith & Fawcett, the descretion of directors in the
construction of article in constitution, must exercise in bona fide in the interest of
the company.
PROCEDURE
Section 105(1) states that an existing members who wants to transfer his shares
to another person shall sign a proper instrument of transfer. The transferor or
transferee of shares may then lodge the duly signed and stamped the transfer form
with the company.
Section 106(1) provides that the company shall register the transfer within 30 days
from the receipt of the instrument of transfer unless the following conditions are
present:
(a) CA 2016 or company’s constitution expressly permits the directors to refuse
or delay the registration for such reasons stated
(b) The directors have passed a resolution to refuse or delay the registration of
transfer within 30 days from the receipt of the instrument of transfer and the
resolution states the reasons for the rejection or delay, as the case may be
and
(c) The notice of resolution is sent to both transferor and transferee within 7
days of the resolution, and where the company is public company, the notice
of resolution must also include the reasons of rejection or delay.
In section 106(2) the directors may refuse or delay the registration of transfer if
the shareholder fails to pay the company an amount due in respect of those shares,
whether by way of consideration for the issues of shares or in respect of the sums
payable by the shareholders in accordance with the constitution. Therefore, one of
the reason is where the shares have not been fully paid-up.
Therefore the transfer of shares subjected to discretionary power of company as
stated in Re Smith and Fawcett. The discretion of director to restrict the transfer
must be done in good faith as stated in Kesar Singh v Sepang Omnibus Co Ltd.
Non compliance with notice of refusal to register the transfer is under Section
106(3) states that company and officer shall be liable for a criminal offence to a
fine not exceeding fifty thousand ringgit and further fine not exceeding five
hundered ringgit for each day which the offence continues after conviction.
Section 107 permits a transferor or transferee to apply court order to transfer his
shares. The court may order the company to register its transfer, if the Court
satisfied that the application is well-founded. In Lim Ow Geok v Sg Merah, where
the constitution of company empowers to refuse to register the transfer in particular
circumstances, the court will examine whether the refusal is authorised. The court
also will consider whether the reason of refusal is sufficient.

TRANSMISSION OF SHARES
Section 109(1) provides that where the existing member is deceased or becomes
a bankrupt, the following person may notify the company in writing and requires
the shares to be transferred to him.
• Where the deceased member was the sole holder of the shares, by the legal
representative
• Where the deceased member was a joint holder, by the survivor
• Where the member is a bankrupt, by the Director General of Insolvency.
In section 109(2) provides the member to elect to transfer the shares to another
person by signing the transfer form. Section 109(3) states the procedure for the
transfer of share applies, but the company is given longer time to register the
transfer within 60 days.