Beneficial ownership vests on allotment, enabling stamp duty exemption where transferee is effectively owned by the transferor.

For exemption from stamp duty under Notification No. 1 dated 16th January, 1937, beneficial ownership of the transferee shares vests on valid allotment and communication of allotment, together with entry on the register and issuance of share certificates; these events create an equitable right enforceable in law. Reciprocal unperformed obligations in a reconstruction agreement do not prevent such vesting unless a clear condition precedent bars vesting. Applying these principles, the required beneficial ownership threshold was met and the exemption certificate should be granted.

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Issues: Whether, for the purpose of exemption from stamp duty under Notification No. 1 dated 16th January, 1937, at least 90 per cent. of the issued share capital of the transferee company was in the beneficial ownership of the transferor company so as to entitle the transferor to a certificate of exemption.

Analysis: The notification requires (i) that the instrument evidences transfer of property between companies limited by shares, and (ii) that at least 90 per cent. of the issued share capital of the transferee be in the beneficial ownership of the transferor. Beneficial ownership is a right to enjoyment enforceable in law and may vest before formalities such as delivery of share certificates. On allotment and communication of allotment a binding contract arises and the applicant acquires an equitable right; entry on the register and issuance of share certificates are indicia of ownership. In the facts found, shares were allotted, the allotment communicated, share certificates were issued and the transferee's name entered on the register of members; there was no condition precedent in the allotment that alone would prevent vesting of ownership. Reciprocal obligations in the composite reconstruction agreement do not negate the vesting of beneficial ownership once allotment and communication have occurred, although remedies for breach remain available to the opposite party.

Conclusion: The condition of beneficial ownership of at least 90 per cent. was satisfied; the exemption under Notification No. 1 dated 16th January, 1937 applies and a certificate of exemption should be granted.

Ratio Decidendi: For the purposes of the Notification, beneficial ownership vests on valid allotment and communication of allotment (and related entry on the register), and reciprocal unperformed obligations in a reconstruction agreement do not prevent vesting of beneficial ownership absent a condition precedent barring such vesting.

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