Section 56 of the Companies Act, 2013: Transfer and Transmission of Securities
Section 56 regulates the registration of transfer and transmission of securities by a company. It lays down the requirements for a valid instrument of transfer, the time for lodging it, the treatment of transmission by operation of law, delivery of security certificates, transfers by legal representatives and consequences of default.
Law position reviewed: September 2026.
- For a transfer to which Section 56(1) applies, a proper instrument of transfer must ordinarily be duly stamped, dated and executed by or on behalf of the transferor and transferee.
- The prescribed instrument for transfer of securities held in physical form is Form SH-4 under Rule 11 of the Companies (Share Capital and Debentures) Rules, 2014, subject to the applicable statutory exceptions.
- The transfer instrument is generally required to reach the company within 60 days from its execution, together with the relevant security certificate or, where no certificate exists, the letter of allotment.
- Transmission is different from transfer: it takes place by operation of law, for example on death of a security holder, and Section 56(2) permits registration on receipt of the required intimation.
- Default under Section 56(1) to (5) attracts the penalty prescribed by Section 56(6).
Meaning of transfer and transmission of securities
Transfer of securities is a voluntary act by which a holder transfers securities or an interest in the company to another person, subject to the Companies Act, the applicable rules, the company's articles and other applicable law.
Transmission of securities occurs by operation of law rather than by a voluntary transfer instrument. Common examples include transmission following the death of a holder or other legally recognised succession. Section 56(2) preserves the company's power to register such transmission after receiving an intimation from the person to whom the right has transmitted.
Section 56(1): Conditions for registration of transfer
A company must not register a transfer covered by Section 56(1) unless the statutory requirements are satisfied. The principal requirements are:
- a proper instrument of transfer in the prescribed form;
- the instrument must be duly stamped, dated and executed by or on behalf of the transferor and transferee;
- the transferee's name, address and occupation, if any, must be specified;
- the instrument must ordinarily be delivered to the company within 60 days from the date of execution; and
- the relevant certificate must accompany it, or, where no certificate exists, the letter of allotment.
The statutory requirement does not apply in the same manner to a transfer between persons whose names are both entered as holders of beneficial interest in the records of a depository. Where an instrument has been lost or was not delivered within the prescribed period, the proviso permits the company to register the transfer on such indemnity terms as the Board considers fit.
Form SH-4 and Rule 11
Rule 11 of the Companies (Share Capital and Debentures) Rules, 2014 prescribes Form SH-4 (Securities Transfer Form) for transfer of securities held in physical form. The Ministry of Corporate Affairs has also clarified that Form SH-4 is used for transfer of the interest of a member in a company not having share capital, with the references in the form read accordingly.
Section 56(2): Transmission by operation of law
Section 56(2) makes clear that the transfer-instrument requirements in sub-section (1) do not prejudice the company's power to register a transmission. On receiving an intimation of transmission of a right to securities by operation of law from the person to whom the right has transmitted, the company may register the transmission in accordance with law.
Section 56(3): Transfer of partly paid shares
Where the transferor alone applies for transfer of partly paid shares, the company must give notice of the application to the transferee in the prescribed manner. The transfer cannot be registered if the transferee objects within two weeks from receipt of the notice.
Section 56(4): Time limits for delivery of security certificates
| Event | Statutory period |
|---|---|
| Subscribers to the memorandum | Within 2 months from incorporation |
| Allotment of shares | Within 2 months from allotment |
| Transfer or transmission of securities | Within 1 month from receipt of the instrument of transfer or intimation of transmission, as applicable |
| Allotment of debentures | Within 6 months from allotment |
These periods apply unless delivery is prohibited by law or by an order of a Court, Tribunal or other authority. Where securities are dealt with in a depository, the company must intimate the details of allotment to the depository immediately on allotment.
Section 56(5): Transfer by legal representative of a deceased person
A transfer of a security or other interest of a deceased person made by the deceased person's legal representative is valid even where the legal representative was not himself or herself the holder at the time the transfer instrument was executed.
Section 56(6): Penalty for default
Following substitution by the Companies (Amendment) Act, 2020 with effect from 21 December 2020, where a default is made in complying with Section 56(1) to (5), the company and every officer of the company who is in default are each liable to a penalty of Rs. 50,000.
Section 56(7): Fraudulent transfer by depository or depository participant
Without prejudice to liability under the Depositories Act, 1996, where a depository or depository participant transfers shares with an intention to defraud a person, Section 56(7) makes it liable under Section 447 of the Companies Act, 2013, subject to the applicable law and facts.
Text and official legal resources
For the authoritative statutory text and rules, refer to the official Companies Act, 2013 on India Code, the Companies Act, 2013 published by the Ministry of Corporate Affairs, and the Companies (Share Capital and Debentures) Rules, 2014 and Form SH-4.
Section 56 - statutory structure
Sub-section (1): Restricts registration of transfer unless the prescribed transfer instrument and accompanying documents satisfy the statutory requirements, subject to the depository exception and the Board's power to accept an indemnity where the instrument is lost or delayed.
Sub-section (2): Preserves registration of transmission by operation of law.
Sub-section (3): Protects the transferee in a transferor-only application involving partly paid shares by requiring notice and a two-week objection opportunity.
Sub-section (4): Prescribes periods for delivery of certificates for subscribers, allotments, transfers, transmissions and debenture allotments.
Sub-section (5): Validates a transfer executed by the legal representative of a deceased holder.
Sub-section (6): Prescribes the penalty for default under sub-sections (1) to (5).
Sub-section (7): Applies Section 447 where a depository or depository participant transfers shares with intent to defraud.
This article is a general explanation of Section 56 and should be read with amendments, rules, notifications, the company's articles and other laws applicable to the particular security and transaction.