Company Share Transfer

Company Share Transfer Company share transfer is the process of transferring shares from one party to another party. When there is some form of transaction related to the transfer of property from one person to another person, then such transaction is known as a transfer. Share transfers are governed by the prov..

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Company Share Transfer- An Overview

The shares owned by a particular individual are governed by the provisions of the shareholders agreement. The shareholders agreement governs the basic provisions for which shares are owned by a specific shareholder.

Shareholders are the members of the company. When there is some form of transaction related to the transfer of shares from one shareholder to another shareholder, then there is a change of legal ownership of the shares which are transferred from one individual to another.

Such transfer arrangements are governed by the provisions mentioned in the articles of association of the company. The principle off separate legal entity would be applicable to a company which is incorporated. Once the company is incorporated, the status of the members would be separate from that of the company.

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Advantages of Company Share Transfer

Advantages of Company Share Transfer

The following are advantages of company share transfer:

  • Share Transfer Agreement

    By having a share transfer agreement, the parties would know their respective rights and liabilities related to the transfer of shares.

  • Legal Registered Shares

    Shares would be registered under the Company Share Transfer provisions.

Regulatory Body/Authority for Company Share Transfer

The regulatory body/authority for transfer of shares is the Companies Registry and the Ministry of Corporate Affairs. (MCA)

The provisions of the Companies Act, 2013 govern the transfer of shares from one party to another party. Section 187 of the Companies Act, 2013 speaks about the provisions related to the transfer of shares.

Procedure for Company Share Transfer

The following procedure has to be utilised for Company Share Transfer:

  • First and foremost, the parties would have to review the relevant provisions under the Articles of Association (AOA) of the company. Such provisions have to be addressed through the company share transfer procedure.
  • In the next step, the shareholder must provide notice to the director of the company regarding the share transfer protocol.
  • After this has been communicated, the company would intimate the other directors regarding the transfer of shares of the members.
  • When the shares are transferred, they would have to be valued. The principles of valuation have to be considered here. Usually the valuation of shares would be carried out by a Chartered Accountant. The principles of valuation have to be adhered before the transfer of shares occurs.
  • For the transfer to occur such has to be filed in physical form. The same share transfer has to be carried out through the share transfer deed through Form- SH 4.
  • In the next step, the form has to be executed by the transferor and the transferee. In case of the death of the transferor or the transferee then the legal representatives would sign and execute the share transfer form.
  • Then the applicant who wants to transfer the shares must pay the respective stamp duty as per the Indian Stamp Act and the respective stamp duty notification. The stamp duty payable in one state would be different from the stamp duty payable in another state.
  • In the next step, the deed related to transfer of shares must be signed by the transferor and the transferee. Such form of execution must be carried out in presence of one witness. Other information such as the witness’s full name, signature and other information must be provided.
  • In the next step, there has to be attachment of the share certificate or allotment letter with the share transfer deed, and every instrument of transfer deed must be delivered to the company within 60 days from the date of execution of share deed by or on behalf of the transferor and by or on behalf of the transferee.
  • If the Documents are in order, then the board of directors of the company would pass a resolution for the transfer of shares. With this the transfer of shares of a private limited company is completed.
  • In the next step, the company would have to carry out the delivery of the share certificates to all the transferees within one month of the transfer.

What are the Documents required for Company Share Transfer?

The following Documents are required for Company Share Transfer:

  • Resolution taken by the Company Regarding the Company Share Transfer
  • Notice of Transfer by the Private Limited Company
  • Certificate of Incorporation of the Company
  • Memorandum of Association and Articles of Association of the Company
  • Offer letter from existing shareholder of the company
  • Approval from Existing Shareholders related to the transfer
  • Stamp Duty Paid
  • Share Transfer Deed of the Company
  • Other Resolutions Related to the Transfer of Shares
  • Any certificates related to the transfer.

What are the time limits for making a company share transfer?

For a Company Having some form of Share Capital- There must be a proper instrument of transfer for the shares of the company. The transfer must be carried out 60 days from the date of execution.

Notice- There has to be some form of notice regarding the transfer of shares from the transferor to the transferee. There should be no form of objection from the transferee regarding this form of transfer. The time period for the No Objection Certificate must be within two weeks of the notice.

A company would deliver the certificates based on the requirements in the prescribed time limits-

  • For Subscribers of a Memorandum- Two months from the date of incorporation
  • For allotment of shares- usually this would take two months from the date of allotment

Penalties for Non-Compliance with Company Share Transfer

The penalties for non compliance with the provisions related to Company Share Transfer would be based on the requirement of the Companies Act, 2013.

The penalty for non-compliance is Rs 25,000. However the penalty would extend to Rs. 5, 00,000/-.

Apart from this there are also penalties for the officer in default which is Rs 10,000/- but which can extend to Rs. 1, 00,000/-.

How can Enterslice Help in Company Share Transfer?

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Frequently Asked Questions

The share transfer in the company would be the process in which shares are transferred from one shareholder to another.

For the easiest way to transfer shares in a company a resolution related to the same has to be considered.

Usually the resolution for a general meeting would be a board resolution taken by the company.

The Document or instrument used for share transfer is the form SH-4.

No there is a prescribed procedure for carrying out the process of share transfer.

The following parties are involved in the company share transfer:

• Transferor

• Transferee

• Company.

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