About share transfer in a Company
Transfer of Share refers to the transfer of title of the shares between the transferor (one who transfers) and the transferee (one who receives). The shares of a public company are freely transferable unless the company has a valid reason to disallow the same. But, for private limited companies, as per Companies Act 2013, we should follow some rules and procedures.
One of the important features of the shares of a company is the transferability of shares in a private company. Section 44 of Companies Act 2013 provides that the shares, debentures or other interest of the member of a company are moveable property and transferable like any other movable property in the absence of any expressed restrictions under the article of the company. Hence, they’re transferable in the manner as provided in the company’s Articles of Association.
A company will need to register a transfer of shares of the company to complete the process of share transfer. This is as per the format in Form No SH. 4, and then you can hold such securities in the physical form. Filling this form for transfer of shares is the first and foremost step under the procedure of share transfer.
Parties involved in Transfer of Shares
- Subscribers to the memorandum.
- Legal Representative, in case of a deceased
Procedure for Transfer of Shares under the Companies Act, 2013 for a Private Limited Company
As per Companies Act 2013, for a private limited company, shares can be transferred between the parties in the following procedures:
- A notice should be served by the transferor in writing to the company about his/her intention to transfer the shares in a private limited company
- On receiving the notice from the transferor, the company will notify the members of the company about the availability of shares for purchase.
- When somebody shows interest in the process of transfer of shares in a private limited company, then one has to fill up the share transfer deed or the share transfer form for a private company as per the share transfer Form SH 4. One has to duly stamp the share transfer form and it should have adequate value with date.
- The next step in the procedure for transfer of shares of a private limited company is a relevant share certificate or the allotment letter
- One should duly execute the form for transfer of shares in a private company by both the transferor and transferee. For execution, the deed should be duly stamped, adequately valued, dated and cancelled.
- In respect to the transfer of shares, you should attach it with the deed and send the same to the company within 60 days from the date of execution either by the transferor or the transferee of shares
- Share transfer agreement and the executive share holder agreement shall regulate the relationship between the shareholders.
Documents required for Transfer of Shares
The following documents are required to execute the transfer of shares:
- Original share certificate(s) of transferor.
- Self-attested PAN Card copy of sellers and buyers.
- Payment of appropriate stamp duty @0.25% on market value (franking/share transfer stamps)
- Duly filled and signed form SH-4
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