Transfer of Stocks and Shares

TRANSFER OF STOCKS AND SHARES Great Britain.—Stocks and shares define the extent of an in vestor's holding either in a loan to a company, municipality or a government, or in the capital of a company. The transfer of stocks and shares is concerned with the formalities that have to be gone through when stocks or shares are bought or sold. Usually, this is a question of purchase or sale, but this is not always the case.

Three people are directly concerned in every transfer. These are the buyer, the seller and the company or other body which has issued the stock. The buyer has to be assured that the title he acquires is recognized by all concerned ; the seller has to be able to prove that he has duly delivered the stock or shares, and the company has to be satisfied that the transfer is a legitimate one, executed in good faith and beyond dispute. Other people are concerned indirectly. Thus the buyer and seller always act through agents, such as their solicitor, banker or stock-broker and the company often employs an agent, such as its bankers, to keep its register of stockholders. Furthermore, when securities are bought and sold on the stock exchange, they may pass through the hands of several intermediaries before they reach the ultimate buyer. Finally, the Inland Revenue authorities are concerned, for certain kinds of transfer are liable to duty.

The machinery of transfer is designed to meet the needs of all those mentioned above and to leave no room for dispute. It takes three main forms to suit the three main classes of stocks and shares.

(I) Inscribed Stock.

Here the names of all stockholders are inscribed in the books kept by the company's or Government's registrar, which is usually a big bank, such as the Bank of England (for British Government stocks) or the Westminster Bank (for certain colonial and corporation stocks). When stocks are bought and sold, the buyer's name is substituted for that of the seller in the registrar's books, which are the sole evidence of possession. It is true the buyer gets a "stock receipt," but this is so much "waste-paper." The registrar, of course, has to be satisfied that the transfer is in order. Hence he will only act on the instructions of persons known to him. Usually the seller gives his brokers a power of attorney, and as these brokers are known to or can be identified to the registrar, all they have to do is to produce their power of attorney to the registrar as their authority and then the transfer is effected without difficulty. In addition, the seller is

notified by post that a power of attorney in his name has been lodged, and is given time to protest if everything is not in order.

(2) Registered Stock.

Here the stock-holder or share-holder has a certificate showing the nature and extent of his holding, and his name, address and the size of his holding are also entered in the company's share register. The procedure of transfer is dif ferent. On a sale being made, the seller's brokers send him a "transfer form," stating the amount and nature of the stock and the price at which it has been sold, and also containing a legal form of agreement as to the sale and purchase. This the seller signs in the presence of a witness and returns to his brokers, to gether with the share certificate. It is then passed on to the buyer's brokers and so to the buyer, who similarly signs it in the presence of a witness. It is finally sent with the share certificate to the company's registrar, who, accepting the completed transfer form as his authority, records the transfer and amends the certificate in accordance with the provisions for recording transfers laid down by the company's articles of association.

(3) Bearer Stock.—Here the possession of the stock or shares by the holder is the only evidence of title required, and so delivery of the stock or shares in question is all that is needed.

Certain general points arise. The first is that dealings on the London Stock Exchange are usually "for the account," i.e., for settlement on every alternate Thursday. On this day, stocks and shares must be delivered by the seller to his broker, and the buyer in his turn must pay cash to his broker. Should the seller delay in delivering his certificate and the completed transfer form, his broker may "buy in" the stock against him, and charge the seller with any loss on the repurchase. Next, the buyer must not be impatient for his transfer form or share certificate. Even after settling day, the form has to come back from the seller, be com pleted by any intermediaries and finally come to him, while many companies provide that transfers have to be passed at the next board meeting before they take effect. Next, the transfer form must be filled in and witnessed correctly and without delay, and while, for most stocks and shares, a common form can be used, for some a special form is necessary.