Companies Act Section 126 — Right to dividend, rights shares and bonus shares to be held in abeyance pending registration of transfer of shares
CHAPTER VIII DECLARATION AND PAYMENT OF DIVIDEND
Commercial / Corporate
Summary
Where a share transfer document has been handed over to a company for registration, but the company has not yet registered the transfer, the company must hold off on certain benefits related to those shares. This applies even if other parts of the Act say something different.
Under clause (a), the company must move the dividend money for those shares into the Unpaid Dividend Account mentioned in section 124. The only exception is if the person whose name is currently registered as the share owner gives written permission for the dividend to be paid directly to the person who is supposed to receive the shares under the transfer document.
Under clause (b), the company must keep in abeyance, meaning hold back, any offer of rights shares that would normally be made under clause (a) of sub-section (1) of section 62, and any issue of fully paid-up bonus shares that would normally happen under the first proviso to sub-section (5) of section 123. These offers and issues are paused until the transfer is registered.
Official Text
Where any instrument of transfer of shares has been delivered to any company for registration and the transfer of such shares has not been registered by the company, it shall, notwithstanding anything contained in any other provision of this Act,—
(a) transfer the dividend in relation to such shares to the Unpaid Dividend Account referred to in section 124 unless the company is authorised by the registered holder of such shares in writing to pay such dividend to the transferee specified in such instrument of transfer; and
(b) keep in abeyance in relation to such shares, any offer of rights shares under clause (a) of sub-section (1) of section 62 and any issue of fully paid-up bonus shares in pursuance of first proviso to sub-section (5) of section 123.