Identify when the special gate applies
Section 56(3) of the Companies Act, 2013 addresses an application by the transferor alone relating to partly paid shares. Section 56(3) and rule 11(3) require notice and no objection within two weeks of receipt. The prescribed Form SH-5 asks the transferee to lodge any objection within those two weeks and states that if none is received, no objection is presumed. A signed reply is evidence of an express response; the form also provides for silence after proper receipt and expiry of the period. This guide assumes a case where the non-depository transfer route is legally available; check any applicable dematerialisation rules first.
Read the applicable text: MCA: Companies Act, 2013, section 56 Gazette of India: Companies (Share Capital and Debentures) Rules, rule 11 and Form SH-5.
Calculate the actual response period
Use the supported date the transferee received the notice, rather than the date the company issued it, the transferor’s application date or the date the shares changed in an internal system. Record the receipt date, the deadline and any response. If relying on the presumption in SH-5, keep proof of actual receipt, the elapsed period and the check for objections. Do not record silence as an express reply.
Reconcile the unpaid amount and the proper share class
Identify the affected shares, nominal amount, paid-up amount and unpaid balance, distinguishing uncalled amounts from called amounts unpaid where relevant. Check that the notice and no-objection cover the same shares and terms. Resolve inconsistent share counts or changes in call status before deciding whether the statutory condition is met.
Keep the rest of the transfer review separate
The SH-5 record is only one condition. For an eligible physical transfer, check the duly stamped and executed SH-4, delivery to the company within 60 days of execution under section 56(1) and rule 11(1), the share certificate or allotment letter, and any applicable restrictions. Resolve any timely objection, contested receipt, qualified response or dispute about a late reply before registering. Preserve the actual timeline rather than changing receipt or approval dates.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Receipt controls
Notice is issued on 3 September and received on 6 September. Two weeks from receipt is 20 September. A supported no-objection on 18 September arrives 12 days after receipt.
Illustrative example 2: Late response
Notice is received on 8 October and a no-objection arrives on 24 October. Sixteen days elapsed, two days beyond the 22 October endpoint. The letter is not a timely express response; if no objection was made by the deadline, assess the prescribed presumption separately using the receipt and response records.
Illustrative example 3: Receipt not established
The company sends notice on 1 July and assumes the endpoint is 15 July. Evidence later shows receipt on 5 July, giving a 19 July endpoint on the stated dates. Retain both events.
Illustrative example 4: Unpaid nominal amount
A transfer covers 1,000 shares of ₹10 nominal value with ₹6 paid per share. Nominal value is ₹10,000, paid amount ₹6,000 and unpaid amount ₹4,000. Determine call status separately.
Illustrative example 5: No-objection covers only part
An application covers 750 partly paid shares but the response identifies only 600. The remaining 150 are not covered by that response; clarify before relying on it for the full transfer.
Illustrative example 6: Mixed share populations
A file covers 2,000 shares, of which 1,400 are fully paid and 600 partly paid. The latter are 30% of the total. Isolate those 600 for the stated section 56(3) review without bypassing other transfer checks for either group.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm which legal transfer route is available | Company classification and dematerialisation review |
| 2 | Identify who made the application | Application and signatures |
| 3 | Verify whether the shares are partly paid | Register, certificates and call history |
| 4 | Prepare SH-5 for the identified shares | Prescribed notice and supporting details |
| 5 | Keep proof of dispatch and actual receipt | Service and receipt record |
| 6 | Calculate the two-week endpoint | Dated deadline worksheet |
| 7 | Verify any response or document the expiry without objection | Response and date, or receipt and objection log |
| 8 | Resolve objections and late, qualified or mismatched responses | Exception review |
| 9 | Complete the remaining transfer checks | Instrument and applicable legal controls |
| 10 | Retain the complete chronology and decision | Register and approval support |
Sixteen practitioner FAQs
1. When does section 56(3) apply on its terms?
When the transferor alone applies and the application relates to partly paid shares.
2. Which form is prescribed for the notice?
Form SH-5 under Rule 11(3).
3. Does the clock start on dispatch?
It starts from receipt by the transferee.
4. How long is the period?
Two weeks from receipt.
5. Can silence be recorded as an actual no-objection?
Do not record silence as an affirmative response. SH-5 states that no objection is presumed when none is submitted within two weeks of receipt. Confirm valid notice, receipt and the full response period before relying on that wording.
6. Does a signed document for different shares cover the current application?
Match the exact share details and scope.
7. What if there is no reliable receipt date?
Resolve receipt evidence before calculating the deadline.
8. Can a late reply be dated earlier to fit?
No. Preserve actual dates and review the lawful next step.
9. Does this article authorise a physical transfer where demat is mandatory?
No. Establish the legally permitted transfer route first.
10. Is SH-5 itself the transfer instrument?
No. SH-5 gives notice; SH-4 is the prescribed instrument for an eligible physical transfer.
11. What if both parties submitted an application?
The express trigger in section 56(3) is an application by the transferor alone. Rule 11(3) is worded more broadly for registration of partly paid shares, so check that rule and the actual transfer route before dispensing with the notice.
12. Does unpaid nominal value mean every rupee has already been called?
No. Verify the calls and amounts unpaid separately.
13. Can one notice refer to several groups of shares?
Ensure that the prescribed notice and response identify the relevant groups and amounts.
14. What if the transferee gives a qualified response?
Examine whether the condition is met before registering.
15. Does timely no-objection complete every transfer requirement?
No. Review the applicable instrument, company and legal requirements separately.
16. What evidence should remain after registration?
Keep the notice, proof of receipt, any response or record that no objection arrived in time, the share reconciliation and the approval record together.
Official sources
MCA: Companies Act, 2013, section 56 Gazette of India: Companies (Share Capital and Debentures) Rules, rule 11 and Form SH-5