9870310368 9599553498

Learning

Learning » Compliances » Procedure for Transmission and Transfer of shares as per Companies Act, 2013

SP Services

Procedure for Transmission and Transfer of shares as per Companies Act, 2013

Transfer of Shares

One of the crucial features of the Private Limited Company or a Limited Company is the free transferability of ownership. The Transfer of shares is a voluntary act by the parties, and after transfer, the ownership of the shares is transferred from the transferor to the transferee, whereas the Transmission of shares means transmission of shares by operation of law.

In case of transmission of shares, no consideration is required under the Companies Act 2013, the transfer of shares in a private limited company is subject to some restrictions. For transfer of shares, a transferor has to execute a valid deed in favor of transferee, and the liability of the transferor ceases.

Free Transferability of Securities

Section 58(2) of the Companies Act 2013, deals with free transferability of securities, where the securities or other interest of any member in a public company shall be freely transferable

Key points of the Transfer of Shares

Section 56(3) of the Companies Act 2013, deals with the transfer of shares where the company will register a transfer of shares when an instrument of share transfer is-

  • Duly stamped,
  • dated and executed by the transferor in support of the transferee

Further, the details of the member, i.e. name, address, and occupation is required to be delivered to the company by either party within 60 days from the date of execution. A share certificate is also required relating to the securities.

In case of shares held in physical form, an instrument of transfer of securities shall be in form SH-4, and every instrument of transfer with the date of the execution shall be delivered to the company within 60 days from the date of execution.

Note – In case of no share certificate in existence, a related letter of allotment of securities is required.


Loss of Transfer Deed

In case loss of transfer deed or the deed has not been delivered, the company can register the transfer on an indemnity bond. Where an application in writing is made to the company bearing adequate stamp duty for an instrument of transfer, and it is proved to the satisfaction of the Board of Directors that the transfer deed signed by or on behalf of the transferor/transferee has been lost, the company may register the transfer on such terms as to indemnify as the board may think fit.

Transfer of Shares in case of a Deceased Person

In the case of Company, the transfer of security of a deceased person that is being made by his legal representative will be legally binding. The legal representative will be treated as if it had been the holder during the time of the execution of the instrument of transfer.

The Time Limit for Delivery of Share Certificate

The time limit for delivery of certificate is within 1 month from the date of receipt by the company of the instrument of transfer.

Applicability of Stamp Duty

The stamp duty applicable for transfer of shares is 25 paisa for every 100 rupees or part thereof of the value of the share. The share transfer form delivered to the company should be adequately stamped i.e. the stamp of adequate value should be affixed and canceled on the transfer deed.

Note – Where an instrument is executed by or on behalf or in favor of the Government, no duty shall be chargeable. However, in some instances, the government would be liable to pay to duty chargeable in respect of such an instrument.


The Procedure of Transfer of Shares

In the case of Private Company, the below-mentioned procedure is to be followed-

  1. The Transferor will give notice in writing for his tension to transfer his/her share to the company.
  2. In return, the company should notify the members other than the transferor as regards the availability of the shares and the price at which such shares would be available to them.
  3. The price is generally determined by the directors/auditors of the company.
  4. Further, the company should intimate with the members, the period within which they should communicate their acceptance to purchase a share on transfer.

Note – In a case where none of the members come forward to purchase the shares, the shares can be transferred to an outsider, and the company has no other option than to accept the transfer.

Terms Related to Transfer of Shares

Forged Transfer – In case of forged transfer, the signature of the transferor is forged. In case if the transfer of shares is forged and the company has registered the transfer, the Actual owner of the company can apply for the rectification of the register of members and his/her name to be put back on the register of members.

Blank Transfer-It refers to the transfer of shares by Blank instrument of transfer. The instrument is blank if-

It contains the signature of the transferor but does not contain the name of the transferee and the date of transfer.

Transmission of Securities

Transmission of securities/shares takes place when the registered holder of the securities dies or is adjudicated as an insolvent, or if the holder of securities is a company, it goes into liquidation.

In case of death of a shareholder of Company, the legal heir who want transmission by operation of law in his or her favor, will file a simple application with the Company with the below-mentioned documents such as:

  • Death Certificate,
  • Succession Certificate,
  • Probate,
  • Specimen Signature of Successor

On submission of the above documents, the company will check the application for transmission of shares by taking into consideration the following key points-

  • Name, address, occupation, father’s or husband’s name, his shareholding, and is accompanied by the pertinent share certificates.
  • Death certificate of the deceased member;
  • If the deceased member has left no Will, a Succession certificate is required and in case, if the deceased member has left a Will, related probate or letter of administration.
  • Affidavit by the legal heir.

Note – In case of joint holding, on the death of a member, the survivor/survivors shall be the only persons recognized by the company as having the title to his interest in the shares.

Suggested Read: Company Share Transfer

  • 341
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
    341
    Shares
Priyanka Bajpayee

Priyanka Bajpayee has done Masters in International Business Law and well versed in content writing covering the area of legal and finance. Also, she has practical experience of almost 1.5 years in Legal compliance and secretarial work.

Business Plan Consultant


Request A Call Back

Are you human?: 3 + 8 =

Categories

Startup CFO

Trending Articles

Hey I'm Suman. Let's Talk!