ABSTRACT
In appropriate circumstances, the transfer of the property may be effective in equity, despite the failure of the transferor to complete the transfer of the legal title. This would be the position when the settlor has done all in his power to give the trustee the legal title and the only hurdle for the complete transfer of the legal title lies outside the settlor’s control. This difficulty is frequently experienced in respect of shares where the transfer is required to be executed in accordance with the company’s articles of association followed by registration in the company’s share register (ss 182 and 183 of the Companies Act 1985). The articles of association of most private companies give the directors an absolute discretion to refuse to register a transfer of shares without stating reasons (notification of refusal is required to be made within two months of the instrument of transfer being lodged with the company – s 183 of the Companies Act 1985). A transferor who has executed the appropriate documents of transfer of shares and has delivered the same to the company in the expectation that the transfer of the legal title will be complete will have done everything that is required of him to transfer the shares. At this time the transfer of the equitable title to the shares will be complete. The directors may or may not refuse to register the shares. This is a matter which is beyond the transferor’s control. The transferor will hold the legal title to the shares on constructive trust for the transferee. This is known as the principle in Re Rose. The effect of this principle is that voting powers are required to be exercised by the legal owner in favour of the beneficiaries. Likewise, dividends declared are held in trust for the beneficiaries. A transfer, for estate duty (and inheritance tax) purposes, will be recognised on the earlier date of the transfer of the equitable interest.
