Tuesday, August 25, 2020

Assignment of Shares of Companies

Assignment of Shares

A share, being a movable property, may be freely assigned or transferred from one person to the other. This, however, does not necessarily mean that no restriction may be made on the free transfer of shares where provided in the company’s constitution. Exceptionally, the law or agreement of the company may hinder free assignment of shares. To this end, Art.333(1)&(2) of comm. code states that restrictive provisions may be made in the articles of association or by general resolution of an extraordinary meeting on the free transfer of shares or making assignment of shares subject to the consent of the board of directors.

Nevertheless, these restrictive provisions may not result in preventing assignment of shares nor in causing serious damage to a shareholder who may wish to assign his shares.

 Art. 340(1) - “Bearer shares are assigned by delivery, with out any other requirement.”

Therefore, when a company issues bearer shares, the shares can freely be assigned in the manner similar to other ordinary movable properties for which delivery alone is sufficient with out any further formality requirement.

On the other hand, the assignment of registered shares shall be effected only when they are registered in the name of the assignee after the name of the assignor is struck out. Art 341 of the comm. code provides that ownership of registered shares shall be established by the relevant entry in the register kept at he head office and no transfer is complete until recorded in this register. Thus, it will be a defective transfer and shall be of no effect in the absence of registration for a valid assignment of registered shares necessarily requires registration.

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