Share interest is a movable property that can be alienated or lost through specific administrative board actions.
1. Transfer vs. Transmission of Shares
| Transfer of Shares (Section 56) | Transmission of Shares |
|---|---|
| A voluntary act of the shareholder to sell or gift shares to a transferee. | Takes place by operation of law due to the death, insolvency, or lunacy of a member. |
| Requires an instrument of transfer (Form SH-4) signed by both transferor and transferee, and stamp duty payment. | No transfer deed or stamp duty is required; requires proof of legal heirship, succession certificate, or probate. |
| Private companies can restrict the right to transfer via AOA. | Cannot be restricted by the company, as it is an involuntary legal devolution. |
2. Forfeiture of Shares
Forfeiture is the penalty imposed by the company on a member for failing to pay calls on shares. Forfeiture is only valid if:
- Authorized by the Articles (AOA).
- A clear 14-day notice is served demanding payment with interest.
- A formal Board Resolution of forfeiture is passed.
Upon forfeiture, the member's name is struck off the register, and the forfeited shares become the property of the company, which can re-issue them at a discount.