One can transfer the shares in their name to another person easily. These shares are called transfer shares. Now learn more about it
Every registered company will usually have a shareholder contract, director, and board of directors. However, a shareholder at any point in his life can transfer shares to any other person. This transfer of shares can be conducted due to multiple reasons. A person can sell or transfer the share to raise net working capital for the company or completely re-organise the firm. One can also pitch in new partners who can provide benefits for the company by transferring some of their shares.
Practically speaking a share, by the Companies Act, 2013, is an indivisible unit of capital that represents a company’s connection with its shareholders. A gift or sale is the usual method of transferring shares. You can transfer shares in a company even after it has been established as long as there are enough shares.
You can also change the share structure of your business by adding a new shareholder contract or altering the existing percentage of shares among shareholders. When selling or giving away shares, a share transfer is a procedure of shifting them from one individual to another. This article will explain how to distribute existing shares in your firm.
Share Transfer Provision Under Company Act, 2013
The Companies Act, 2013 and Companies (Share Capital and Debentures) Rules, 2014 stipulate how shareholder agreement can transfer their shares. The value of a share is its face value and the face value of all shares issued represents the company’s total capital, which may not accurately reflect the market value of those shares.
Documents Required for Share Transfer
The following documents of both the acquirer and transferor are mandatory
- Income-tax PAN
- Passport size photos
- Aadhaar card
- Utility bill
- Passport
- Driver’s license
- Voter’s card
- The transferor’s original stock certificate
Note: Before changing your share structure, our experts in Vakilsearch suggest contacting your account manager so you may fully understand and counsel on your intentions. If this option is not feasible feel free to contact us.
Share Transfer Procedure
One can transfer the shares to another person using the steps given below.
- The form (SH-4) must be filled correctly with the right information and then must be submitted to the Director for Endorsement (DOE)
- The transfer shares must be obtained in the prescribed form (i.e. Form SH-4). The instrument of transfer must not be in that form if the following conditions are met
- When a managing director transfers shares on behalf of another body corporate under Section 187 of the Companies Act, 2013
- When a managing director transfers shares on behalf of a corporation owned or controlled by the central or state government
- When a managing director shifts his shares for a deposit that is secured by repayment of a loan or advance or If any of the following applies, shares can be transferred via deposit as security for repayment of any loan or advance from any other banks or any other financial institution, under the control of a state or central government
- To register a transfer share, one must provide the Articles of Association(AOA) in case of shares, trust shares in the case of debentures, and transfer shares by the Companies Act, 2013
- The stamp duty, which is the amount charged for applying a stamp to a transfer shares, is 25 paise for every ₹ 100 worth of the share or part of it
- To ensure that the transfer of shares/debentures is processed appropriately, the signature, name, and address of the person who gave his approval for transfer must be affixed to the share/debenture certificate or allotment letter and sent to the company
- If the application made by the transferor is for partially paid shares, the company must duly notify the amount due on shares/debentures to the transferee
- A notice of the amount due must also be sent to the transferee, who must acknowledge receipt of the notification within two weeks. Unless the transferee consents, the company may not register the transfer
- If the responsibilities of shareholders company are listed on a recognised stock exchange, the company may not charge any fee for the registration of shares and debentures
- A company must not register a transfer of partly paid shares if one of the following situations occur
- Until two weeks have passed since the transferor provided a no-objection certificate, the transferee has not refused the transfer
- A form No. SH.5 notification has been issued
How Vakilsearch Can Help in Share Transfer?
Vakilsearch is the largest law firm in India that provides a platform for lawyers, accountants, and company secretaries. We provide legal services for over 1000 companies and LLP s every month. We make your dealings with the government as easy as possible, our experts take care of all the paperwork. Our team has qualified business advisors and lawyers who provide the best legal services. You can easily contact us through our bustling website.
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