No. 5 is, of course, the best form in which to take the security.
Although shares may be registered in the names of a bank's nominees, and those nominees be regarded by the company as the actual owners of the shares and the persons to whom dividends will be paid and who will be held liable for any calls which are made, it is, of course, understood between the customer and the bank that the transfer has been effected merely for the purposes of security and that, as soon as the necessity for the security ceases, the shares will be retransferred to the customer. To make the position clear a memorandum or agreement is signed by the customer on the same date as the transfer is signed, qualifying the deed of transfer and stating that the shares are transferred to the bank as security for all moneys owing and that the bank may, when necessary, realise the shares for the purpose of repaying any advance. All dividends received by the bank on such shares belong, of course, to the customer and will be credited to his account. When the security is no longer required the shares are retransferred to the persons entitled to them.
Where shares are transferred to a bank or the nominees of a bank as security for a loan or overdraft, the consideration which is inserted in the document of transfer is generally five shillings or ten shillings. Such a consideration is called a " nominal con sideration," and the transfer requires to be impressed with a ten-shilling stamp. (See
NOMINAL CONSIDERATION.) 1 t is important to note that if a transfer taken by a banker as security should eventu ally be proved to be forged, the banker may, even though the shares were transferred into his name and sold, be compelled to make good the value of the shares to the true owner. Transfers should, therefore, when possible, be signed in the presence of an official of the bank, and particularly if the shares are in the names of several persons. (See FORGED TRANSFER.) It frequently happens that part of the shares included in a transfer which is held by a banker is sold by the customer. In such cases a fresh transfer should be taken for the shares which still remain as security. It is not sufficient to alter and initial the old transfer.
‘Vhere a company is being wound up voluntarily, every transfer of shares, made after the commencement of the winding up. except transfers made with the sanction of the liquidator, shall be void ; and in the case of a winding up by the Court, every such transfer shall, unless the Court other wise orders, be void. (Section 205, Com panies (Consolidation) Act, 1908.' A stockbroker often gives a banker security over shares which have been given to him by a client as security. (See STOCKBROKER'S LOANS.)