Section 126 of the Companies Act, 2013
Section 126 of the Companies Act, 2013
Title: "Right of objector to transfer of shares"
📝 Provision Summary:
Section 126 deals with the situation where shares are under dispute — for example, where ownership is contested, or there's a court injunction or order of restraint preventing transfer.
🔍 Key Points:
Suspension of Rights:
When any instrument of transfer of shares is lodged with a company for registration, and:
The transfer is in dispute, or
A court or tribunal has ordered to restrain the transfer,
The company must not transfer the shares and hold the rights (like dividends, voting, etc.) in abeyance until the dispute is resolved.
Applies to Bonus Shares as well:
If bonus shares are issued on such disputed shares, those too must be kept in abeyance.
Effectively:
The rights attached to disputed shares (e.g. voting rights, dividend rights) are frozen till the ownership or claim is settled legally.
⚖️ Purpose:
This provision protects the interest of parties when there's a legal dispute or injunction regarding the transfer of shares.
Ensures that the company remains neutral and doesn’t favor any side.
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