Share Transfer

Share Transfer

Description: Transfer of shares means handing the rights and possibly the duties of a company member voluntarily. The rights and the duties of the share transfer happen from the shareholder who is wishing to not be a member of the company anymore to a person who is willing to be a member of the company.

Thus the shares in a company are transferable like any other movable property in the absence of the expressed restrictions under the Articles of the Company.

Who is involved in Share transfer?

• Subscribers to the memorandum
• The legal representative in the case of a deceased
• Transferor
• Transferee
• Company (Whether listed or unlisted)

Preparation to Initiate Share Transfer

• Check for restrictions in the AOA
• First, offer shares to existing members
• Enter into a Share Transfer Agreement
• If they The transfer of Shares are restrict
• The share transfer form is SH-4 (Sec 56)

Documents Required for Transfer of Shares:

• Original Share Certificate of share to be transferred
• Certificate of Stamp duty payment (Franking) on issue of share certificate.
• Valuation and the share transfer agreement.
• Share transfer form duly signed by the parties
• ID and address proof of the transferor and transferee
• Proof of payment of consideration of transfer if any

Transfer of Share Process

Step:1: Notice of Intention to transfer shares: Written notice is submitted to the company by the seller defining his intention to transfer the shares, the existing members of the company are informed and invited to buy the shares.

Step:2: Documentation for Transfer of Shares: When the deal to transfer is finalised, and consideration of such transfer is fixed. Form No- SH.4 is filled up by the prospective buyers and the same is signed by transferor and transferee in presence of a witness. The transferor then hands over the share certificate and SH-4 to the transferee. Appropriate stamp duty on share transfer is to be paid by affixing share transfer tickets on the share transfer form.

Step:3: Transferor send the Share Transfer Form and Certificate to Company: After the transfer is executed, witnessed and adequately stamped, the transferee sends a request for updating of the register of members with his details in replacement of the transferor details. The company records such transfers.

Step:4: Issue of fresh Share Certificate by the company: After the due approval of the board of directors of the company, the share transfer is recorded in the register of transfer of shares and replacement share certificate is issued in the name of the new member of the company.

Timelines:

Businesses with a share capital: The company should not (within 60 days of the execution) register any transfer of shares or ownership interest to any beneficial owners with proper instruments.

Application by the transferor: The transfer should not be registered until the company has notified the transferor within 2 weeks of the notice of the receipt.

No opposition certificate: In the following events the following timelines should be followed

• For memorandum subscribers- Within 2 months from the date of incorporation.
• Allocating all the shares of the company- within 2 months from the allocation date.
• Debenture allocation within 6 months of the allocation date.

Benefits of 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.