The instrument of transfer must be executed both by the transferor and trans feree. When the document has been signed by the transferor he hands it, with the certifi cate, against payment of the purchase money, to the transferee, who also signs it and then sends the transfer and the certifi cate to the company's office along with the company's fee for registration in order that the shares may be registered in his name. The process is usually carried through by a broker. When a transfer is received for registration it must be carefully scrutinised and the particulars of the shares be com pared with the share register. If the instru ment is correctly stamped and properly filled up and executed, the company will, before issuing a new certificate, send a notice to the transferor advising him that a docu ment of transfer purporting to be signed by him has been received and that the shares will, unless he replies by return (or within, say, three days) to the contrary, be regis tered in the name of the transferee. Such a notice helps to prevent a company register ing a transferee upon a forged transfer. A company must, within two months after the registration of a transfer, have the new certificate ready for delivery. (See Section 92 of the Companies (Consolidation) Act, 190S, under CERTIFICATE.) When transfers have been passed by the directors and new certificates issued, they should be filed away in such a manner that any one may be found at a moment's notice if required. A good plan is to number each one and to place the same number in the register of the name of the transferor.
In the case of shares which are not fully paid, the directors of a company should consider whether a proposed transferee is good for the liability upon the shares ; that is, if the articles give the directors power to refuse to register an unsatisfactory person. 1 f the articles do not give such power the directors cannot refuse to register a transfer.
Shares are very frequently transferred into a banker's name, or the names of his nominees, as security for a loan or overdraft. When a banker, without notice of any prior equitable charge, obtains a transfer duly executed in his own favour and gets it registered, he has a legal title to the shares or stock transferred by the instrument. When the banker is registered as the owner of shares which are not fully paid he becomes liable for any calls that may be made, which is not the case if he merely holds the certifi cate with a blank transfer, or does not register a completed transfer. Though registration is necessary to give a banker a legal title, he will, as a rule, be quite safe if he holds the certificate and a duly executed transfer, and gives notice to the company.
It is necessary to give notice to the com pany, otherwise the banker may find his security postponed .to a subsequent charge.
In a case of fraud it is possible for another party to get registered in front of the banker holding the certificate. It has been held that a foot-note upon a certificate to the effect that it must be surrendered before a transfer of the shares can be registered is not binding upon the company. (See CERTIFICATE.) The company may probably not accept notice, or even acknowledge receipt of the letter sending it, and it is, therefore, advisable for a banker to be able to prove that the notice was sent to the company.
A trading company very often has a lien upon its shares for any money owing by the shareholders to the company, a fact which, in some cases, may greatly affect the value of the banker's security, unless the shares are registered in his name. (See LIEN.) Before registering shares in the bank's name, or the names of its nominees, a banker naturally ascertains if there is any liability upon the shares. The certificate, however, does not always show how much has been paid up per share, and the information must be obtained from other sources.
The transfer can be sent in to the company at any subsequent date for registration, and it is considered that it will hold good even though the transferor dies or become bankrupt before registration is effected. It should be noted that, though a surrender of the share certificate is necessary in nearly all cases, there are a few instances where a surrender is not necessary before a transfer can be effected. Certificates need not be produced when transferring National Bank shares, Provincial Bank of Ireland shares, and Royal Exchange Assurance Corporation stock. The Grand Junction Canal Company does not issue certificates at all.
Although a banker can, when the shares are registered in his name and he holds an authority to sell them, dispose of them, \when necessary, without further reference to the transferor, it is customary to give the transferor notice of an intention to sell.
The various ways in which shares can be made available as security are :— 1. A simple deposit of the certificate, with or without notice to the company.
2. A deposit of the certificate, accom panied by a memorandum of deposit, with or without notice to the company.
3. A deposit of the certificate with a blank transfer and qualifying agreement, with or without notice to the company.
4. A deposit of the certificate with a completed transfer and qualifying agreement, with or without notice to the company.
5. Registration of the shares in the name of the bank. A qualifying agreement should be held.
Nos. 1, 2, and 3 are merely equitable charges, and may be postponed to a prior equitable charge.
No. 4 is a good security, as the legal estate can be obtained at any moment by sending in the transfer for registration.