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Transfer of Shares
Complete Rules and Procedures for Share Transfer in a Private Limited Company
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
To successfully execute a share transfer, the following parties are generally involved in the process:
Subscribers to the Memorandum
The original members who signed the Memorandum of Association during the incorporation of the company.
Legal Representative
Acts on behalf of a deceased shareholder to manage or transfer the shares legally to the appropriate heirs.
Transferor
The current shareholder or the individual who is intending to transfer or sell their shares to someone else.
Transferee
The individual or party who receives or purchases the shares transferred by the transferor.
Procedure for Transfer of Shares
As per the Companies Act 2013, for a private limited company, shares can be transferred between the parties following these steps:
Click on the folders to read the steps
Step 1: Notice to Company
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.
Step 2: Notify Members
On receiving the notice from the transferor, the company will notify the members of the company about the availability of shares for purchase.
Step 3: Share Transfer Form
When somebody shows interest in the process, 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. It should be duly stamped with adequate value and date.
Step 4: Relevant Certificate
The next vital step in the procedure for the transfer of shares of a private limited company involves attaching the relevant share certificate or the allotment letter.
Step 5: Execute the Form
One should duly execute the form for transfer of shares in a private company by both the transferor and transferee. The deed should be duly stamped, adequately valued, dated, and cancelled.
Step 6: Submit in 60 Days
In respect to the transfer of shares, you should attach the relevant documents 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.
Step 7: Shareholder Agreement
The Share transfer agreement and the executive share holder agreement shall regulate the ongoing relationship between the shareholders and the company moving forward.
Documents Required for Transfer of Shares
The following documents are required to properly 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
- Duly filled and signed Form SH-4
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