Share Transfer

Transfer of shares means transfer of whole/part ownership in the shares of a company from one person to another. In private company the right to transfer of its shares restricted. The entire process for giving effect to transfer of shares is divided in two parts:

1. Steps to be taken by the transferor and transferee, in case shares are held in physical form
2. Steps to be taken by the company after receiving the share Transfer Deed

Who is transferor and transferee?

Transferor is a person who transfer the shares and Transferee is the person in whose names the shares or securities are to be transferred by the company after following the procedure as defined under the Companies Act, 2013 and Articles of Association of the Company.

What is share transfer deed?

Share transfer deed (SH-4) is an instrument of transfer executed in case of physical transfer of shares. A deed of transfer duly stamped and executed by both the parties i.e. Transferor and Transferee need to be delivered to the company for giving effect to transfer of shares within 60 days from the date of execution.

Rate of Stamp Duty on Transfer of Shares

The stamp duty on transfer of shares shall be as per the Indian Stamp Act, 1899. The amount of stamp duty with effect from 1 July, 2020 has changed and shall be calculated on the amount of total consideration.

Steps for giving effect to transfer of shares held in physical form-

By the Transferor and Transferee:

1. Check the Articles of association of the company for any restriction.
2. Check the Shareholders Agreement or Share Purchase Agreement, if any, entered by the transferor, company and other shareholders of the company at the time of purchase of shares.
3. Determine the share transfer price and make the necessary payment.
4. Prepare the share transfer Deed in form SH-4.
5. Make payment of stamp duty on transfer of shares and execute the share transfer deed.
6. Submit the duly signed, dated and stamped share transfer deed within 60 days from the date of execution to the company along with the share certificate(s).

By Company:

1. In case the application for transfer of party paid shares are made to the company, then the company is required to given a notice of application to transferee for receiving no objection from him/her.
2. Call and hold board meeting for giving effect to the transfer of shares.
3. After the approval of the board of directors, make necessary entries in the register of transfer, register of members and share certificates.
4. Enter the name of transferee in the register of members and issue the share certificate within one month from the date of receipt of instrument of transfer.