How To Transfer Shares In Company?

how to transfer shares in company

Every company like Private Limited Company, One person Company etc. has shares that are held by the members of the company. To be a member of the company at least one share must be held by the person, the member can either hold the share during his life or can transfer it to anyone. In One person company if the shareholder transfer his shares, the ownership of the company gets transferred completely as there can only be a single shareholder.  As per section 58(2) of the companies act, 2013, the shares including securities and other interest of any member in a public company is freely transferable. The company shall register the transfer of share in their register if a proper instrument of transfer is duly stamped and signed by both the party’s “transferor” and “transferee”. This document should be delivered to the company within 60 days of execution of transfer along with the share certificate. After receiving the documents, the company will register the name of the new member and issue him a new share certificate. 

Procedure To Transfer Shares In Company

If any member of the company is going to transfer his/her share and shares are in physical form then the following procedure has to be followed:

  • The transferor should give notice to the company about his/her intention to transfer the shares
  • The company will notify its other existing member about the availability of shares and their price.
  • The time limit will be prescribed by the company at the time of notification, within which period any interested member can buy such shares.
  • If no member shows his/her interest in buying such shares then the company will intimate the transferor about such, and then the transferor can transfer his/her shares to any other person. 
  • The transferor will prepare the share transfer deed (FORM SH-4) and mention all the details of both the parties
  • After preparation, the share transfer deed shall be stamped as per Indian Stamp Act
  • The deed shall be signed by both parties 
  • Submit the share transfer deed along with the share certificate
  • After receiving the documents, the company will mention the name of the transferee in their register of members and issue a fresh share certificate to the new member.

Stamp Duty On Share Transfer

The transfer deed (SH-4) should be stamped and the amount of stamp duty shall be paid on such deed, if no stamp duty is paid then the company will not register such transfer. Usually, the value of stamp duty for transfer of share is 25 paise for every Rs. 100 shares or part thereof, the actual amount of stamp duty is mentioned in the state stamp act. There is no need to pay stamp duty if the transfer is executed by or on behalf of the government.

Refusal To Register Share Transfer By Company

There are the following reasons when the company can refuse to register the share transfer in their register:

  • A proper prescribed form has not been used by the transferor and transferee
  • The form is not duly stamped and no stamp duty is paid on such deed
  • Either transferor or transferee didn’t execute the deed by signing it
  • Name, address, occupation, number of shares, the value of shares, etc. all these information is not specified in the deed
  • The instrument of the transfer is not delivered to the company or the share certificate is not attached with the instrument within the given time limit.

Penalty On Share Transfer

When any default is made in complying with the provision of section 56 then the company shall be punishable with a fine which shall not be less than Rs. 25,000/- but which can be extended to Rs. 5,00,000/-
AND, every officer in default shall be punishable with a fine which shall not be less than Rs. 10,000/- but which can be extended to Rs. 1,00,000/-

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