Transfer of Shares in a Company
Issuance of new Share Certificates
Preparation of SH-4 Form
Preparation of Share Transfer Deed
Preparation of necessary documents and completing compliances as per Secretarial standards
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Introduction:
Share transfer is a crucial aspect of private limited companies, allowing for the mobility and negotiation of shares. While shares in public corporations can be easily transferred, private companies often have provisions in their Articles of Association (AOA) to limit the transferability of shares. It is essential to review the company's AOA before initiating the share transfer process. This article provides a comprehensive guide to share transfer in a private limited company, including its benefits, a checklist for transfer, required documents, features of the transfer, and the step-by-step procedure to ensure compliance with ROC compliances.
List of Documents Required
Memorandum of Association
Certificate of Incorporation
Details regarding the share transfer
KYC Documents of Transferor and Transferee
Resolution and Notices (Formats will be provided)
Valuation report ( if available)
How Does It Works?
Form Submission
Callback From Our Team
Final Quote And Payment
Document Submission
Filing of Relevant Forms
Issuance of New Share Certificate
Benefits of Share Transfer:
Liquidity: Shares can be converted into cash, providing immediate access to funds or facilitating investment diversification.
Diversification: Share transfers allow individuals to reduce risk by diversifying their investment portfolios.
Estate Planning: Share transfers can effectively pass on wealth to future generations or charitable organizations.
Corporate Governance: Share transfers can enhance corporate governance by bringing in new shareholders with diverse perspectives and expertise.
Checklist for Transfer of Shares: To ensure a smooth share transfer process, follow this checklist:
- Prepare a transfer notice to draft the share transfer to the company.
- Complete the share transfer agreement (Form SH-4) duly signed by both the transferor and transferee.
- Notify the company of the security of devices for the transfer period.
- Attach the required share transfer stamps to the transfer agreement.
- Gather the share certificate or document and the letter of distribution.
- Obtain a board resolution approving the share transfer.
- Delegate authority for the transfer process.
- Distribute the share certificate of transfer.
- Share transfer agreement (Form SH-4) duly executed and stamped.
- Agreement between the transferor and transferee, if optional.
- Share certificates.
Features of Share Transfer:
- Transfer of Ownership: Shares represent the transfer of ownership from one entity to another.
- Transfer of Rights and Obligations: All rights and obligations associated with the shares are transferred.
- Documentation: Share transfers are documented through a stock transfer form, specifying the terms and conditions.
- Transfer Fees: Fees such as brokerage fees or stamp duty may be applicable, usually paid by the transferee.
- Approval: Transfer of shares may require approval from the company’s board of directors or other relevant parties.
- Transfer Restrictions: Certain restrictions, outlined in the company’s AOA, may limit the transfer of shares.
Steps Involved in Share Transfer Initiation
- Identify Share Transfer Requirements: Determine the specific requirements for transferring the shares.
- Obtain Necessary Documents: Collect share certificates, transfer forms, and other legal documents.
- Complete the Transfer Form: Fill out the transfer form with relevant details.
- Obtain the Transferor’s Signature: Have the transfer form signed by the transferor in the presence of a witness.
- Notify the Company: Send the completed transfer form to the company for approval.
- Obtain the Transferee’s Signature: The transferee must sign the transfer form to accept the shares.
- Register the Transfer: Submit the completed transfer form to the relevant regulatory body or stock exchange for registration.
- Issue New Share Certificates: If applicable, issue new share certificates to the transferee.
- Update Company Records: Update the company’s records to reflect the change in ownership.
Conclusion:
Filing Form INC-20A is a crucial step in ensuring compliance and commencing business operations. By adhering to the prescribed process and submitting the required documents, companies can avoid penalties, establish their eligibility for borrowing, and enhance their credibility in the public domain. For expert assistance and seamless ROC filing services for Form INC-20A, you may contact our experts at Instafiling. Our experienced professionals are dedicated to providing tailored solutions to meet your specific requirements.
FAQs
The shares cannot be transferred from one company to another. However, the person willing to sell shares of one company can transfer the same to another person.
Yes, the shares in a company can be transferred to another person. However, there are restrictions to transfer shares in private companies. Accordingly, the same shall be transferred as per the procedure laid in articles of association or Shareholders agreement.
Depending on the nature of shares, transfer of shares can be equity share transfer or preference share transfer.
Following documents are required for transfer of shares:
- Sh-4 (Instrument for share transfer)
- Share Certificate or letter of allotment
- Board resolution
- Share Purchase Agreement (optional)
Any shareholder of the company can transfer his/her shares to other person, subject to the restrictions in Articles of Association.
The rate of stamp duty on transfer of shares is 0.015% of the amount of consideration.
The cost of transfer of shares is the amount of stamp duty involved i.e 0.015% of the amount of consideration.
The transfer of shares is not a tedious process and can be completed maximum within 2-3 days.
There is no filing required with MCA for transfer of shares. However, Sh-4 shall be duly executed and Board resolution shall be passed for taking into note the transfer of shares.
Share transfer fees is the rate of stamp duty on transfer of shares is 0.015% of the amount of consideration.
The transfer of shares as per the Companies Act, 2013 refers to legally sell the shares to other person
The legal agreement between transfer, transferee and the Company can be executed in the form of Share Purchase Agreement.
The stamp duty on transfer of shares can be paid by the transferor or transferee upon their mutual understanding or by the person whose name is mentioned in the agreement.
As per Companies Act, 2013 there are no requirements of valuation certificate for transfer of shares.
The main provisions of transfer of shares are laid down under Section -56 of the Companies Act, 2013 and it states the execution of instrument of transfer in Form SH-4 and the issue of share certificate within one month from the date of transfer.
The shareholder can transfer the shares to any person subject to restrictions of the Act and the board of directors shall take note of same through board resolution.
No, shareholders approval is not required to transfer the shares.
Yes, the transfer of shares is registered in Form Sh-4.
Original Share Certificate or letter of allotment is required to be submitted along with the share transfer application.
The directors may refuse the share transfer if the same is not as per the Shareholders Agreement or against the provisions of Companies Act.
Transfer of shares can be done at any time and the whole process can take a maximum of 2-3 days for completion.
When the shares are transferred, then the transferor loses all the rights and obligations with respect to the shares transferred.
In case of transfer of shares from one demat account to another, there is no stamp duty involved.
Yes, the transfer of shares can be done online if the company has ISIN number and the shareholder is having securities in dematerialised form.
The cost of stamp duty for share transfer is 0.015% of the amount of consideration.
The fee that is involved in transfer of shares in private company is the stamp duty that is required to be paid at the rate of 0.015% on the amount of consideration.
The rate of stamp duty on transfer of shares is fixed at a rate of 0.015% of the amount of consideration.
Yes, the company through board resolution is required to approve the transfer of shares.
Yes, a member of the company can transfer his shares, subject to the restrictions of articles of association and Shareholders agreement.
