Transfer of Shares in a Company

Transfer Shares refers to the transfer of shareholding or change in ownership of shares in a company by a person to another person. The person who transfer the shares is called ‘Transferor’ and the person who gets the share transferred is called as ‘Transferee’.


‘A Share’ is the share in the Share Capital of a Company.  Share Capital of the Company is the investment by the Shareholders. Share Capital of the Company is divided in to smaller units called ‘Shares’ and the shareholders are the owners of the Company. 

Being the owners of the Company, shareholders are the ultimate decision makers in a Limited Company. Shareholders are the people who appoint the Directors for the day to day management of Company subject to provisions of Articles of Associations and Companies Act and Rules.

The Shares of a Company is freely transferable from one person to another person subject to conditions in Articles of Association of the Company and provisions of Companies Act.

In a private limited company, share transfer is usually restricted as per the terms specified in Articles of Association of the Company while in case of a public limited company it is freely transferable. Generally, the shares of a private limited company are owned by family persons or a small group of persons or investors. A private company can restrict the right to transfer the shares by adding restrictive condition for transfer of shares in the articles of association of the company. Therefore, the Articles of Association of the Company should be reviewed, and the restriction or condition provided therein should be fulfilled before effecting any share transfer.

In case of companies where there is a shareholder’s agreement between the promoters and investors, or promoters themselves, the condition shareholders agreement also to be adhered before effecting the share transfer.

The transferor and transferee should execute a Share Transfer Deed in Form No. SH-4 and the same shall be delivered to the company within sixty days from the date of such execution.

The deed should be duly stamped and should be properly cancelled by a rubber stamp or defaced otherwise.

The Stamp Duty payable on Share Transfer is at the rate of 0.25% of the value of consideration. (For eg. Stamp Duty for a Consideration of Rs.10000.00 shall be Rs.25.00). The Share transfer Deed is invalid if the stamp duty is not paid.

The Company is required to effect the transfer of shares and make needful changes in the Register of Members and issue new certificates/endorse the transfer on certificates in within a period of one month from the date of receipt of Transfer Deed by the company.


Execution of Share Transfer Deed in form SH-4.

Transferor and transferee should execute a Share Transfer Deed in form SH-4. The deed should be duly stamped as per the stamping requirements.

Submission of Share Transfer Deed and Share Certificates to the company.

Deliver the duly executed share transfer deed and relevant share certificates to the company for needful action from the Board of Directors for efecting the Transfer

Conditions of Articles of Association and Shareholders Agreement, if any.

Check the compliance of conditions regarding Share transfer in the Articles of Association of the company and Shareholders Agreement, if any, and comply the same in order to give effect to share transfer.

Board Meeting to approve the Share Transfer.

Convene the Board Meeting and pass the Board resolution approving the Share Transfer.

Updation of Register of Memebers and Share Certificates

Company to update the Register of Members and issue new share certificates or endorse the transfer on existing certificates as the case may be.

Requirements


Transferor

There should be a Shareolder willing to transfer the Shares

Transferee

There should be a Shareolder willing to buy / takeover the shares

Consideration

The Value of shares to be decided mutually or as per Arctiles of Association of Company or Sharehoders Agreement

Share Transfer Deed

The Trasnferor and Transferee shoulde execute a Share Tansfer Deed in Form SH-4

Articles of Association

In case of private limtied Companies, the conditions of Articles of Association for transfer of shares to outside shareholders, if any, to be complied.

Shareholders Agreement / Co-Founders Agreement

Conditions of Shareholders Agreement / Co-Founders Agreement, if any, to be complied.

Documents Required


From Trasnsferor & Transferee

  • Share Certificates

  • Duly executed SH-4 (Share Transfer Deed)

  • Stamping of Transfer Deed

Board Meeting Documents

  • Board Meeting Notice

  • Board Meeting Minutes

  • Board Meeting Attendance Sheet

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How it works

  • Decide the Transferor and Transferee and Consideration for Transfer

  • Execute Transfer Deed Pay Stamp duty

  • Submit the Deed and Certificates to Company

  • Board to Pass Resolutions for Transfer

  • Update the share transfer in the register of members and Issue new share certificates to the transfe

FAQ

Frequently Asked Questions on Transfer of Shares in a Company

What is Share Transfer?

Share transfer means transferring the shares from the person having the shares (transferor) to the person desirous of acquiring the shares (transferee).

Why a Share Transfer is done?

Share Transfer can be done either because the person having shares does not want to continue as the shareholder of the company or he/she wants to withdraw his investment from the company.

Whether any forms need to file with ROC for Share Transfer?

No, there is no requirement to file any form with ROC regarding Share Transfer. The details of share transfer is submitted to ROC

What is Share Transfer Deed (SH-7)?

This is a Deed to be executed between the transferor and transferee for transfer the shares. This Deed contains the details regarding transferor, transferee, number of shares, details of share certificates, consideration for share transfer etc.

Is it mandatory to execute a Share Transfer Deed?

Yes, in order to give effect to the share transfer, it is mandatory to execute a share transfer deed.

What are the documents required to complete Share transfer process?

The following documents are required for share transfer: • Duly Stamped Share transfer deed • Board Meeting Documents (Board Meeting notice, minutes and attendance Sheet) • Share Certificates

Is there any limit for minimum / maximum no of shares to be transferred?

No, there is no such limit on minimum and maximum no of shares.

Who can transfer shares in a company?

The existing Shareholders having shares in their name can transfer the same to other person.

How Share Transfer is done?

The transferor and the transferee need to execute a Share Transfer Deed in form SH-4. The said deed should be stamped as per the Stamping requirements.

What are the Stamping requirements for Share Transfer Deed?

Stamp duty is payable at Re. 0.25 per consideration of Rs.100 for transfer of shares. Share transfer stamp duty is paid through ‘Share Transfer Stamps’.

Is there any restriction regarding consideration to be paid for shares?

No, there is no such restriction regarding consideration. It depends on the mutual consent of transferor and transferee.

Who will issue the new Share Certificates?

The company, whose shares are transferred, will issue the new share certificates to the transferee.

How Share Transfer is done?

The transferor and the transferee need to execute a Share Transfer Deed in form SH-4 and need to send the same to the company. The company will conduct a board meeting to approve the same and will issue new share certificate(s) to the transferee.

What is transmission of shares?

Transmission of shares means the process of transmitting the ownership of shares to the legal heirs of a shareholder, consequent to the death of a shareholder.

Any filing required for share transfer?

Share transfer does not require any registry filings. The details of shares transfer will be reflected in the subsequent Annual Returns; thus, the details will be updated in the ROC records.

Transfer of Shares in a Company

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