Share Transfer

The share transfer procedure for a private company involves executing a Share Transfer Deed (Form SH-4) and obtaining a Board resolution. For demat shares, the process is completed electronically, whereas physical shares require the submission of certificates.

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Private Limited Company Share Transfer

Private Limited Company share transfers involve a formal, structured procedure to change ownership. Governed by the Companies Act, 2013, this process facilitates the legal transfer of shares from one person (the transferor) to another (the transferee). The company’s Articles of Association (AOA) are key, often containing restrictions like pre-emptive rights for existing shareholders.

Share Transfer Process in a Private Limited Company

The share transfer procedure is a multi-step process designed to ensure all legal and internal rules are followed.

1. AOA Review and Offer

The transferor must first review the AOA for any restrictions. According to common practice, they must offer the shares to existing shareholders first. The price is usually set by the directors or an auditor. If existing members don’t buy the shares within a specific timeframe, they can be offered to an outside party.

2. Document Execution

The core document for the share transfer is the Share Transfer Deed, also known as Form SH-4. Both the transferor and the transferee must sign this deed in the presence of a witness. The deed must be properly stamped according to the state’s stamp duty laws. The original share certificate is also required.

3. Board Resolution

The company’s Board of Directors must approve the transfer by passing a formal Board Resolution. This resolution accepts the transfer and directs the company to update its records.

4. Record Updates and New Certificate

After the board approves the transfer, the company updates its statutory registers and records to reflect the new ownership. A new share certificate is then issued to the transferee, officially completing the process. The entire transfer deed and certificate must be submitted to the company within 60 days of the deed’s execution.

Key Documents Required for Share Transfer

To complete a share transfer, the following documents are essential:

Form SH-4 (Share Transfer Deed).
Original Share Certificate.
Board Resolution approving the transfer.
PAN cards of both the transferor and transferee.
Any other supporting documents specified in the AOA.

Simplify Your Share Transfer with FileMyFirm

The share transfer procedure for a Private Limited Company requires careful adherence to legal provisions and a company’s internal rules. FileMyFirm offers end-to-end assistance, from reviewing your AOA to drafting resolutions and handling all legal formalities, ensuring a seamless and compliant share transfer process.

Frequestly asked questions ( FAQ )

Share Transfer is the process by which ownership of a company’s shares is voluntarily conveyed by a shareholder (the Transferor) to another person (the Transferee). This is typically a contract-based transaction where the seller transfers ownership rights in exchange for consideration.

Share Transfer is a voluntary act (a sale, gift, or contract) where the owner willingly transfers shares while alive.
Share Transmission is the transfer of shares by operation of law (e.g., when a shareholder dies, the shares are transmitted to the legal heir/nominee; or when a shareholder is declared insolvent, the shares are transmitted to the official receiver). Transmission does not require a transfer deed.

The mandatory physical document for registering a share transfer is the Share Transfer Deed, officially known as Form SH-4 under the Companies Act.

What documents must be submitted to the company for a transfer?

For a valid transfer, the following documents are typically required:

The original Share Certificate.
The duly executed and stamped Form SH-4 (Share Transfer Deed).
A copy of the Share Purchase Agreement (if applicable).
Proof of identity and address of both the Transferor and the Transferee.

What is the general procedure for transferring physical shares?

The typical procedure involves the following steps:

Execution of Form SH-4: The Transferor and Transferee must execute (sign) the Share Transfer Deed (Form SH-4).
Affixation of Stamp Duty: The Form SH-4 must be properly stamped with the requisite stamp duty, which varies by state and is calculated based on the market value of the shares being transferred.
Submission to Company: The executed Form SH-4, along with the original Share Certificate, is submitted to the company’s Board of Directors (or the Registrar & Share Transfer Agent).
Board Approval: The Board of Directors must review the documents and pass a Board Resolution approving the transfer.
Issuance of New Certificate: Once approved, the company cancels the old Share Certificate and issues a new one in the name of the Transferee.

Yes, a company has the legal right to refuse registration of a transfer, typically if:

The transfer instrument (Form SH-4) is not properly executed, stamped, or accompanied by the original share certificate.
The company’s Articles of Association (AOA) contain restrictions on the transfer of shares (common in Private Limited Companies).
The company has a lien (right to retain) on the shares due to unpaid calls by the Transferor.

If a company refuses the transfer, it must send a notice of refusal to the Transferor and Transferee within 30 days of the date the instrument of transfer was delivered.