A share transfer in a private limited company takes one of two routes. Physical shares move on a Form SH-4 share transfer deed, stamped at 0.015% of the price and lodged with the company within 60 days of signing; a company covered by the demat rule 9B needs the shares in demat form first, and they then move between demat accounts. Either way the articles apply, and for physical shares the company must deliver the registered certificate within one month of receiving the deed.
What limits share transfers in a private limited company?
The articles do. A private company must restrict the right to transfer its shares in its articles and cap its members at 200 (section 2(68)), so every transfer starts with what the articles, and any shareholders' agreement, allow.
- Board discretion. The model articles in Table F let the board decline to register a transfer of partly paid shares to a person it does not approve, or of shares on which the company has a lien, subject to appeal under section 58.
- Pre-emption. The articles or a shareholders' agreement may give existing shareholders a first right to buy. If so, offer the shares to them in the agreed way before signing with an outsider.
- The 200 cap. A transfer that adds new members cannot take the company past 200, not counting current employees and certain former employees (section 2(68)(ii)).
- Ownership date. Under Table F, the seller remains the holder until the buyer's name is entered in the register of members, not when the money changes hands.
Physical SH-4 or demat: which route applies?
It depends on rule 9B of the Companies (Prospectus and Allotment of Securities) Rules. A private company that is not a small company must issue securities only in demat form and facilitate dematerialisation of all of them, and its shareholders must dematerialise shares before transferring them.
For private companies, other than producer companies, that were not small on 31 March 2023, the deadline was 30 June 2025. A company that is not small at a later year end has 18 months from that year end to comply. Apart from government companies, only a company that was small at the close of every financial year from 31 March 2023 onwards stays outside the rule, and its shareholders can keep using SH-4. Since 1 December 2025, small means paid-up capital up to ₹10 crore and turnover up to ₹100 crore, for a company that is not a holding or subsidiary company.
For demat shares, section 56(1) needs no instrument between holders recorded with a depository. The seller gives an off-market delivery instruction to their depository participant, the depository collects the stamp duty before moving the shares, and its records serve as the register of members for those shares (section 88(3)).
SH-4 share transfer deed: contents and execution
SH-4 is the instrument section 56(1) requires for physical shares. It must be in the prescribed form, duly stamped, dated, and executed by or on behalf of both the seller and the buyer, and it must state the buyer's name, address and occupation, if any.
- Lodging. Either party delivers it to the company within 60 days of execution, with the share certificate, or the letter of allotment if no certificate exists.
- One class per deed. Table F lets the board decline an instrument covering more than one class of shares, or one sent without the certificate and evidence of the seller's title.
- Stamp duty is 0.015% of the price, paid by the seller unless the parties agree otherwise. Shares sold at ₹6,00,000 pay ₹90; check any price with the share transfer stamp duty calculator.
- Price paperwork. Keep the share purchase agreement and proof of payment with the company's records.
How long does a share transfer take?
For physical shares, the statutory clocks add up to about three months at most: 60 days to lodge the deed, then one month for the company to deliver the certificate. Both are outer limits, so a transfer between willing parties can finish much sooner.
Example. A seller and buyer sign SH-4 on 12 January 2027, so it must reach the company by 13 March 2027. The company receives it on 20 January 2027. If it refuses, its notice with reasons is due by 19 February 2027; if it registers the transfer, the certificate must be delivered by 20 February 2027.
| Event | Time limit | Law |
|---|---|---|
| Lodging the signed SH-4 | 60 days from execution | Section 56(1) |
| Partly paid shares lodged by the seller alone | Registered only if the buyer, once notified, does not object within two weeks | Section 56(3) |
| Notice of refusal by a private company | 30 days from delivery | Section 58(1) |
| Delivery of the certificate | One month from receipt | Section 56(4)(c) |
| Buyer's appeal to the NCLT | 30 days from the refusal notice, or 60 days from delivery if none is sent | Section 58(3) |
A default under section 56(1) to (5) exposes the company and each officer in default to a penalty of ₹50,000.
What does a share transfer cost?
Two items: stamp duty at 0.015% of the price, the same in every state, and the professional fee. Ofin's share transfer fee starts at ₹2,147, all inclusive, and covers the transfer deed, stamp duty guidance and board approval.
A valuation is the main extra cost, and it is needed only in some cases. Where a resident sells to a non-resident, or the other way round, the RBI's pricing rules need a fair value certified by a chartered accountant, SEBI-registered merchant banker or practising cost accountant, and the transfer is reported in Form FC-TRS through the AD bank. Check whether the company's sector needs government approval with the FDI route checker. Ofin has a package that includes the valuation.
Special cases: gifts, death, lost deeds and refusals
Not every transfer is a straightforward sale. These situations each have their own rule.
- Gift to a family member. It still needs SH-4 or a demat instruction. How stamp duty applies to a transfer without consideration depends on the facts, so check before signing.
- Death of a shareholder. This is transmission, not transfer. The company registers it on an intimation of transmission (section 56(2)) and delivers the certificate within one month (section 56(4)(c)).
- Late or lost deed. If the SH-4 is lost or misses the 60 days, the board may still register the transfer on terms as to indemnity (section 56(1) proviso).
- Refusal or delay. Beyond the section 58 appeal, a person whose name is wrongly entered, omitted or delayed in the register can apply to the NCLT for rectification (section 59).
After the transfer: registers and the annual return
The transfer is complete for the company when the buyer's name goes into the register of members, which is kept at the registered office (section 94). The change then appears in the next annual return, which lists members and changes since the previous year end (section 92(1)(d)).
If the buyer also joins the board, that is a separate appointment: see add directors. If the company needs new money rather than a change of owner, it issues fresh shares instead, which may first need an increase in authorised capital. Ofin's company annual compliance service carries the change into the annual return. For a Mumbai company, see share transfer in Mumbai.
Common mistakes in a private company share transfer
Each of these can delay registration or give the board a ground to refuse:
- An undated SH-4, or one missing the buyer's address or occupation.
- Lodging the deed after 60 days without asking the board to register on indemnity.
- Transferring physical shares in a company that rule 9B requires to be in demat.
- Skipping the first right of refusal in the articles or shareholders' agreement.
- Treating payment as the end of the transfer; until the register is updated, the seller remains the holder.
How Ofin handles a share transfer
Ofin's CAs, CSs and legal professionals check the articles and any shareholders' agreement, prepare SH-4 or guide the demat instruction, work out the stamp duty, and draft the board resolution and register entries. It is 100% online, with a reply within 24 hours, from ₹2,147. Tell us the shares, price and parties to get a fixed-price proposal.
