12.9.8 (Certification of Transfer Splitting of Shares)

Where a shareholder desires to sell only some of the shares represented by a share certificate or to sell them to different buyers, then a problem may arise in that the transferor is required to hand over the share certificate to the buyer to be lodged along with the share transfer form with the company and this may not be possible in such a situation. Therefore, to overcome this problem, a practice has come into being whereby the transferor lodges the certificate and transfer form with the company with a request to certify  the transfer. The company obliges by endorsing a statement to the effect that a share certificate covering those transfers has been  lodged with the company.

The certification is normally done on the transfer form itself. When the transfer is lodged with the company and passed, the company cancels the old certificate and sends a 'certification of transfer’, for the shares transferred, to the transferee and a balance certificate/ticket, for those retained, to the transferor, The 'certification of transfer’ and the ‘balance ticket’ are exchanged for share certificates as and when they are ready. In case of shares being sold to two or more transferees, the certification of transfers is exchanged for the new certificates.

Section 112 provides that certification is merely a representation by the company to any person acting on the faith of it that there have produced to the company such documents, as on the face of them, show a prima facie title in the transfer, but in no way, it is a representation that the transferor has any title to the shares. However,  where any person acts on the faith of an erroneous certification made by a company negligently, the company shall be under the same liability to him as if the certification has been made fraudulently.

The 'Certification of transfer' to be valid should satisfy the following requirements:

(i) the instrument of transfer should be certificated with the words ‘Certificate lodged’ or words to the like effect; (ii) the person issuing the certification instrument must be a person authorized to issue such instruments of transfer on the company’s behalf; (iii) the certification must be signed by any officer or servant of the company or any other person, authorised to certificate transfers on company’ s behalf. Where a body corporate has been so authorised, it may be signed by any officer or servant of that body corporate.

However, it may be noted that there is no statutory obligation cast on the company

to certify transfers.