Understanding Share Transfers and Ownership Changes under CAMA 2020

Understanding Share Transfers and Ownership Changes under CAMA 2020 (Sections 176–181)

Published by Baha’s Books — Business Law and Corporate Governance Insights
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The Companies and Allied Matters Act (CAMA) 2020 governs how Nigerian companies are formed, managed, and operated. Among its key provisions are the rules surrounding the transfer and registration of shares, which define how ownership of a company changes hands.

Sections 176 to 181 of CAMA 2020 specifically address how share transfers are conducted, how the company’s register of members should be updated, and how special circumstances such as death, bankruptcy, and partial transfers are handled.

In this detailed guide, we break down these sections in simple English, explaining exactly what they mean and how they affect shareholders, directors, company secretaries, and investors.

Section 176 — Entry in the Register of Transfers

This section defines the official process for recording share transfers.

When a shareholder (called the transferor) transfers their shares to another person (the transferee), the company is required to enter the name of the transferee in its register of members. This entry is what officially recognizes the transferee as the new shareholder.

The Act says that this registration must be done as if the transferee themselves had applied, ensuring that no unnecessary delays or excuses prevent a valid transfer from being recognized.

It also clarifies that the register of transfers can be electronic — meaning companies can keep their records digitally instead of on paper, as long as they maintain proper accuracy and accessibility.

However, until the transferee’s name is entered into the company’s register, the transferor remains the legal owner in the eyes of the company. So even if a sale or transfer agreement has been completed, the original shareholder still holds legal title until the register is updated.

CAMA also allows a company to refuse a transfer in specific cases. For example:

  • If the share is not fully paid up, the company can refuse to register it.

  • If the company has a lien (a legal claim or right) over the share.

  • If the proposed new shareholder is not approved by the company (for instance, in private companies that restrict membership).

Before recognizing any transfer, the company can insist that:

  1. A transfer fee be paid.

  2. The share certificate and supporting evidence of ownership be presented.

  3. The instrument of transfer (the transfer form) covers only one class of shares.

These requirements protect the company against fraudulent or unauthorized transfers and ensure that the ownership records remain reliable.

Section 177 — Notice of Refusal to Register a Transfer

Transparency is essential in share administration, and Section 177 ensures that companies act fairly when rejecting transfers.

If a company refuses to register a transfer, it must notify the transferee within two months from the date the transfer was lodged (submitted) for registration.

If the company fails to provide this notice, it is in breach of the law. The Corporate Affairs Commission (CAC) can impose penalties on both the company and its responsible officers.

This rule is designed to protect transferees — that is, the people receiving the shares — from being kept in the dark about the status of their applications. It ensures fairness and prevents companies from delaying or blocking legitimate ownership transfers without explanation.

Section 178 — Transfer by a Personal Representative

This section applies when a shareholder passes away.

When a member of a company dies, their personal representative — usually the executor of their will or administrator of their estate — can legally transfer the deceased person’s shares to another person.

Even though the personal representative is not automatically a member of the company, CAMA treats any transfer they make as valid, just as if the deceased shareholder had done it while alive.

This provision ensures that ownership of shares can be transferred smoothly after death, without unnecessary technical delays. It simplifies the estate management process and ensures that inheritance rights can be carried out efficiently.

Section 179 — Transmission of Shares (Death or Bankruptcy)

Section 179 explains what happens when shares pass to someone through death or bankruptcy, rather than through a sale.

If a shareholder who held shares jointly with others dies, the surviving joint holders automatically become the legal owners of the shares. But if the deceased was the sole holder, the only person recognized by the company as entitled to those shares is the legal personal representative (executor or administrator).

However, even after death, the deceased’s estate is not released from any outstanding liabilities associated with those shares — for example, unpaid calls or debts related to share ownership.

In cases of bankruptcy, or when someone inherits shares, the new entitled person must provide proof — such as a probate, letters of administration, or a bankruptcy order — showing their right to the shares. Once the company verifies the evidence, the person can choose to:

  1. Be registered as the new shareholder, or

  2. Transfer the shares to someone else of their choice.

If the new entitled person does not make this choice within 90 days, the company’s directors have the right to withhold all dividends, bonuses, and other benefits relating to those shares until the situation is regularized.

This prevents confusion and protects the company’s record from showing unclear or conflicting ownership claims.

Additionally, until the new holder is registered, they cannot exercise any membership rights, such as voting at meetings, unless the company’s Articles say otherwise.

Section 180 — Protection of Beneficiaries

CAMA recognizes that not everyone who benefits from a shareholding is the registered owner. Some people have what is known as a beneficial interest, meaning that although the shares are legally held in someone else’s name (a trustee, for example), the true economic benefit belongs to them.

Section 180 allows such a person to protect their interest by serving a notice of interest on the company. Once this notice is received, the company must record it in its register of members and ensure that no transfers or dividend payments are made contrary to that notice for at least 42 days after notifying the claimant.

This period provides time to resolve disputes or competing claims of ownership.

If the company violates this rule and makes an unauthorized payment or transfer, it is required to compensate the affected person for any resulting loss.

This provision ensures that beneficiaries — such as heirs, trust beneficiaries, or silent partners — have a formal way to assert and protect their rights in a company, even if they are not the official shareholders on record.

Section 181 — Certification of Transfers

Section 181 addresses situations where a shareholder wants to transfer only part of the shares covered under one share certificate.

For instance, if someone holds 1,000 shares under one certificate but wishes to transfer only 400, they must prepare an instrument of transfer (a formal share transfer form) and submit it along with the relevant share certificate to the company.

The company, after reviewing the documents, must register and certify the transfer. This certification is proof that the company has officially recognized the transaction.

The new certificate (or endorsed document) will show that the partial transfer has been recorded, and this may be done in electronic form as well.

Companies often indicate this by marking the document with phrases such as “certificate lodged” — confirming that they have received and recorded the details of the transfer and are processing it in line with their internal and legal procedures.

This ensures that partial transfers are valid, traceable, and properly documented, thereby keeping shareholding records accurate and up to date.

The Purpose of Sections 176–181 in Practice

Together, these sections create a complete system for managing ownership changes in Nigerian companies. They establish who is legally recognized as a shareholder, the conditions under which shares can be transferred, and the safeguards that protect both companies and individuals.

They ensure that:

  • Ownership cannot change without proper registration.

  • Companies maintain transparent and accurate registers.

  • Heirs, trustees, and beneficiaries have legal protection.

  • Directors act with accountability when transfers are refused or delayed.

  • The law accommodates both traditional (paper-based) and modern (electronic) record-keeping systems.

For company secretaries, accountants, and business owners, understanding these sections is crucial to maintaining legal compliance and protecting shareholder rights.

Conclusion

Sections 176 to 181 of CAMA 2020 outline the backbone of share transfer procedures in Nigeria. They define how ownership passes, how the company must record it, and how rights and responsibilities are transferred in both normal and exceptional situations — such as death or bankruptcy.

By enforcing strict rules on registration, documentation, and notice, CAMA 2020 promotes transparency, accountability, and fairness in every corporate transaction.

For business owners, investors, and corporate administrators, these rules are not just technicalities — they form the foundation of corporate integrity.

For more expert breakdowns of CAMA provisions, IFRS accounting, and Nigerian business law essentials, visit bahasbooks.com — your trusted source for practical accounting, compliance, and business insight.

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