Difference between Issue of New Shares & Transfer of Shares

Difference between the issue of new shares by a company and the transfer of shares already issued by a shareholder

In the first case, it is the company which issues and allots the new shares. In the second, the transaction is a private arrangement and the company comes into the picture only for the purposes of recognition of the transferee as the new shareholder. Therefore, while it is imperative that the company should be a party to any agreement relating to the allotment of new shares, before such an agreement can be enforced, it is not necessary for the company to be a party in any agreement relating to the transfers of issued shares for such agreement to be specifically enforced between the parties to the transfer.

Reference: Para 143 of M.S. Madhusoodhanan and Anr. vs. Kerala Kaumudi Pvt. Ltd. and Ors., (2004) 9 SCC 204, Supreme Court, decided on 01.08.2003

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