Re: Legal Opinion on registration of the transfer of shares of Company 1.
We refer to your letter no. COMPANY 2/LKP/2007/288 dated March 12, 2007 on the above subject.
From perusal of your letter and the provided documents, it appears that Company 2 (“COMPANY 2”) has sold the entire holdings of 200,000 shares of Company 1 (“COMPANY 1”) to Company 3 (“COMPANY 3”) on November 19, 2006. Form 117 has also been duly signed and delivered along with original share certificate to COMPANY 3 by COMPANY 2.
Now, COMPANY 3 has informed COMPANY 2 that the Board of Directors of COMPANY 1 is refusing to register the transfer of shares in favour of COMPANY 3. In this regard, COMPANY 3 has requested COMPANY 2 to send a letter in their prescribed format to COMPANY 1 regarding the transfer of shares.
In these circumstances, you have sought our legal opinion as to whether COMPANY 2 can issue such a letter to COMPANY 1 and if COMPANY 2 can issue such a letter then you have asked us to vet the draft letter provided by you.
According to Section 38 of the Companies Act 1994, an application for the registration of the transfer of shares may be made either by the transferor or the Transferee. So in our opinion, COMPANY 2, as the transferor, may make an application to COMPANY 1 to register the transfer of 200,000 shares to COMPANY 3, the transferee. But please ensure that COMPANY 3 had actually provided COMPANY 1 with the proper instrument of transfer duly stamped and executed by the transferor and the transferee along with the original share scripts.
We have perused the draft letter to be sent by COMPANY 2 to COMPANY 1. We have vetted the letter and drafted a revised version of the letter. Please find enclosed herewith the revised copy of draft letter.
If you have any further query, please do not hesitate to contact the undersigned.
For: “The Lawyers & Jurists”
Subject: Transfer of 200,000 Shares of Company 1.
This is to inform that Company 2 (“COMPANY 2”) has sold the entire holdings of 200,000 shares (“the Shares”) of Company 1 (“COMPANY 1”) to Company 3 (“COMPANY 3”) on November 19, 2006.
To effect the transfer, COMPANY 3, the transferee submitted application on ____________, 2007 to the Company Secretary of COMPANY 1 and requested him to register the transfer of the Shares in ‘favor of Company 3’. It may be mentioned that in compliance with the provision of Section 38(3) of the Companies’ Act 1994 and Article 46 of the Articles of Association of COMPANY 1, the required proper instrument of transfer duly stamped and executed by both transferor (COMPANY 2) and the transferee (COMPANY 3) along with the original share scripts have been provided to COMPANY 1 by COMPANY 3. In spite of complying with the required formalities, we have been informed by COMPANY 3 that the Board of Directors of COMPANY 1 has yet to approve the registration of transfer of the shares.
In this connection, we draw your attention to Article 51 of Articles of Association of COMPANY 1 which states as follows:
“51. The Directors shall not refuse to register the transfer of any share if duly filled in instrument of transfer along with certificate of the shares to be transferred is submitted to the Company.”
In view of the obligation of the Board of Directors under Article 51 of Articles of Association of COMPANY 1, we request you to please register the transfer of the Shares as applied for at your earliest.
Look forward to your prompt action in this regard.
For: “The Lawyers & Jurists”