Here are some of the most simplified legal tips for the people who are looking forward to give shares as gifts.
Being a shareholder in any company, you might find yourself in a situation where you would have to transfer the shares to someone. It is for any reason, whether you want to give your share as a gift or sell some shares to the buyer etc.
Most people don’t know today the significant considerations they need to consider to transfer shares to another. It depends on whether you are selling the shares in exchange for some cash or giving shares to someone for free. Here you can learn everything about Legal tips for Gift deeds for Gift Shares.
Some Essential Facts About the Tax on the Share Transfer
You can get some tax relief on share transfers, like gift holdover relief. It is a designated capital gains tax that you own if you transfer shares for free or below the market value.
The word transfer generally means a conveyance of the property, especially the shares and stocks, from one person to another.
The transfers of the shares might be by way of sale ledge mortgage, gift, succession, death, inheritance, bankruptcy, etc. But due to the vastness of the provisions, the scope here is limited to the transfer of shares by way of gift.
Some Provisions Relating to the Transfer of Shares by Way of Gift
You need to understand the transfer of shares through gifts by Indian laws.
What Do You Need to Know About the Gift?
A gift is ideally the transfer of some existing movable or immovable property made without consideration or voluntarily by one person known as the donor to another one known as the done, and it is accepted on behalf of the individual of that person as per the provision of section 122 of the transfer of property act 1882.
How Does the Transfer of Movable Properties Affect the Gift?
The provision of sector 123 of the transfer of property act 1882 describes that to make movable gift property, the transfer might be effected by a registered instrument signed as aforesaid or by delivery.
Basics About Shares
A share means sharing a company’s share capital, which includes a stock as per Section 2 of the Companies Act 2013.
What Do You Need to Know About the Share Capital?
Share capital is ideally a term that is defined under the Companies Act 2013 as the share capital of a buy share, which includes preference share and equity share capital. The equity share capital has shares with their rights of voting or even the differential rights at par with dividend voting as per the rules.
How Can You Say if the Shares are Movable Property or Immovable Property?
Immovable property includes benefits of land which arise out of the land and all of the factors attached fastened permanently to anything that is not connected to the earth as per Section 2 of the general clause act 1897. Section 2 of the available clause act includes movable property where the property of all the descriptions except the immovable property is given.
Section 2 of the sales good act 1930 says that shares also mean goods.
The transfer related to the provision under the Companies Act 2013. The gift deed must be delivered besides the donor’s share certificate.
- A gift deed beside the share certificate must be accepted behalf of the one accepting gifts.
- Delivery of the executed and duly stamped documents of transfer by the gift by donor, within at least 60 days of the company from the execution date.
- The company must call its meeting of the board, which must be conveyed within at least one month from receiving the transfer documents by the gift way.
- Convey the meeting and pass the board resolution for transferring the shares by gift.
- The company needs to deliver the certificate of share transfer in the given month from the receipt by the company of the transfer documents.
Documents Required
- Gift deed
- Board resolution
- Hand over the position of the share certificate of the company.
Tips to Determine the Valuation of Shares to Fix the Stamps on the Transferred Shares
It is easy to find the price of the shares on most exchanges in the case of the listed company. But in the case of private companies, the value of the shares is challenging to obtain. The value of the shares has to be taken based on the average market value of the shares while you are transferring them or the agreed price between the seller or the buyer, whichever is more.
Ideally, the articles of any private company should contain the provision which will provide the shares must be sold at a price determined by the directors or the auditors of the company, and it should be fair.
Above all gifting your loved one stocks generally means that you are transferring the stock from your name to your. the process is seamless and also easy but it all depends on the stock holdings nature that you are carrying. One of the simplest methods of gifting the stocks is generally through a broker.
Furthermore, when you go through broker you need to ensure that the stocks you are holding are held electronically with the brokerage account. The broker will give you the entire process of transferring as per the preferences with the authorization.
For authorization you need to give in writing and also provide some relevant information about the recipient. Don’t forget to mention the name and address besides your account number. The resident should also have the brokerage account so that they can hold the shares that you wish to give them.
Conclusion
If you want to know how to go about gifting shares to someone, then you surely need legal advice. Vakilsearch can be of best help here, in providing the best services at affordable prices.
Also, Read:
