This legal resource note has been compiled specially for Sa-Dhan by Ramesh S. Arunachalam, using available legal resources in India. First published in August 2006. Sa-Dhan. Website: www.sa-dhan.org

Sa-Dhan Legal Resource Note # 11 Provisions Of The Companies Act Regarding Holding Of Shares Jointly By More Than Two Shareholders

Act: The Companies Act, 1956 Relevant Section 1. Preliminary I) The concept of Joint Shareholding is only a legal

fiction which refers to a situation when the shares in a company are held jointly by more than one person.

II) In the case of Public Limited Company every joint shareholder is considered as a distinct member of the company, while in case of Private Limited Companies every such joint shareholder is considered as single member.

III) In the case of joint shareholding all the joint holders should sign the instrument to transfer the shares or to split the shares into individual holding. However, no instrument of transfer is necessary where there is only transposition of names of the joint holders.

IV) When one of the joint shareholders dies, the surviving holder (or holders) shall be the only person (s) which the company would recognize as a member (or members) of the company, and name of the deceased joint holder shall be deleted from the records of the company. A legal heir of the deceased joint shareholder is not entitled to get his automatically entered in the register of members on the death of the deceased shareholder.

V) Although if the legal heir of the deceased shareholder wants himself to be registered as a member, the surviving joint shareholders must submit a share transfer instrument with the company, wherein the surviving shareholder will be the transferor(s) and the legal heir will be the transferee.

VI) In the case of splitting of the shares, all the joint shareholders must sign the transfer deed as transferors and the respective individual holders, in whose name(s) the splitting is to be made, shall sign it as transferee (s).

2. Application Provision of the Companies Act

Rights/Duties of Joint Shareholders

Section 53 (4) A document to be served by a company on its members may be served on the joint holder named first in the register of members and not separately to all the joint shareholders.

Section 205 (5) Any dividend payable may be paid by cheque or warrant sent through the post

Provision of the Companies Act

Rights/Duties of Joint Shareholders

directed to the registered address of one of the joint shareholders who is first named on the register of members.

Section At a general meeting of a company, the vote of the senior (i.e., first-named) joint holder who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders.

Section In respect of any share (s) held jointly, the company shall not be bound to issue more than one certificate and delivery of the certificate to one of several joint holders shall be sufficient delivery to all such holders.

Section 91 The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof.

Section Any one of two or more joint holders of a share may give effectual receipts for any dividends, bonuses or other moneys payable in respect of such share.

Section 169 A requisition for convening a extra-ordinary general meeting or notice calling a meeting by the requisitionists themselves may be signed by one or some only of the joint holders and such requisition or notice shall have the same force and effect as if it had been signed by all of them.

Section 399(2) Where any share(s) are held by two or more persons jointly, they shall be counted only as one member for the purposes of eligibility to make an application under Section 397 or 398 in case filing an application with the Company Law Board for relief against oppression and/or mismanagement.

3. Filing And Fees 4. Follow Up 5. Miscellaneous