TaxTMI 
TaxTMI 
TaxTMI 
2016 (3) TMI 122
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....included the subject shares. The first Respondent, thereafter, applied for registration of such transfer and inclusion of its name in the register of members. The Appellant rejected the application on the ground that the transfer of shares was in breach of the relevant Articles of Association providing for a right of pre-emption. This rejection was challenged by the first Respondent before the CLB under Section 111 of the Act. The CLB allowed the petition and directed rectification of the register. 3. Learned Counsel for the Appellants submits that the CLB has erred in law by treating the transfer of shares under the scheme of amalgamation as a case of transmission by operation of law, whereas transfer of assets by a scheme of amalgamation is considered as a voluntary transfer between the transferor and transferee companies. He relies on the Articles of Association of the Appellant company and contends that all voluntary transfers come within the pre-emption clause of the Articles. Learned Counsel submits that the subject transfer was in breach of these Articles and was, thus, rightly rejected by the Appellant company. 4. Articles 21 to 43 of the Articles of Association of the Ap....
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.... the share to the Purchasing Member.. (27) If the Company shall not within the space of 28 days after being served with a Transfer Notice, find a Purchasing member and notice in manner aforesaid, the Proposing Transferor shall at any time within there calender months afterwards be at liberty subject to Article 36 hereof to sell and transfer the share (of where there are more shares than one those not placed) to any person and at any price, not being less than the said fair value. (29) Any share may be transferred by a member to any child or other issue, son-in-law, daughter-in-law, father, mother, brother, sister, nephew, niece, cousin, wife or husband of such member and any share of a deceased member may be transferred by his executors or administrators or other legal representatives to any child or other issue, son-in-law, daughter-in law, father, mother, brother, sister, nephew, niece, cousin, widow or widower of such deceased member (to whom such deceased member may have specifically bequeathed the same) and shares standing in the name of the trustees of the will of a deceased member may be transferred upon any change of trustees to the trustees for the time being of such....
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....e, what the transferee company in effect purchases is the transferor company or its undertaking for a specified sum which is ordinarily paid in the form of allotment of shares of the transferee company to the shareholders of the transferor company. The valuation is based on the net of the transferor company's assets and liabilities. This aspect would have an important bearing on the question which we are considering, as I have explained below. 7. If one has regard to the Articles of the Appellant, Articles 21 to 38 apply when any shareholder proposes to transfer his shares. There may or may not be any proposed transferee at that stage. The proposing transferor has to give a notice in writing ('transfer notice') to the company that he desires to transfer his shares. The transfer notice must specify the sum he fixes as a fair value. Upon such notice, the Board of Directors of the company is constituted as an agent of the proposing transferor for sale of the subject shares to any member of the company or person approved by the Board of Directors, who is willing to purchase the shares at the price or at the option of the purchasing member at a fair value to be determined b....
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....be determined by the auditors of the company in accordance with Article 25. The transfer proposed is, in the first place, transfer of the company or its undertaking as a going concern and not of any individual assets including shares held by the transferor company. Secondly, in such a case it would only be permissible to it to transfer the shares as part of the scheme of amalgamation in the event of Article 27 coming into play, that is to say, the company not finding within 28 days of the transfer notice a purchasing member or giving a notice in accordance with Article 24. Even then the transfer must be at a price not below the fair value determined by the auditors of the company. This again is unfeasible and unwarranted within the framework of a scheme of amalgamation. A proper reading of the Articles seems to be that any transfer of shares occasioned by a scheme of amalgamation sanctioned by the court is not a transfer of shares within the meaning of Article 21 to 38 but a case of under Article 39 of transmission of shares 'by any lawful means other than by transfer in accordance with' the earlier Articles. After all the 'transmission clause' contained in Article ....