Share Transfer in Company

It is the procedure of transferring existing shares from one person to another either by sale or gift. Shares in company are transferable like any other movable property; it is a voluntary handing over the rights to a person who wishes to become member in a company.

Who are involved in the process of share transfer?

• Subscribers to the memorandum
• Transferor
• Transferee
• Legal Representative (in case of deceased)
• Listed/Unlisted Company

Share transfer procedure as per the Companies Act, 2013

• A transfer deed needs to be obtained in the prescribed form namely Form SH-4 endorsed by the prescribed authority.
• The instrument of transfer may not be in the prescribed form (Form SH-4) in the following situations:-

a. Section 187 of the Companies Act, 2013, where a director or nominee transfers shares on behalf of another body corporate;

b. Where transfer of shares takes place by director or nominee on behalf of a corporation owned or controlled by the central or state Government;

c. Transferring of shares by way of deposit as a security for repayment of any loan or advance If they are made with any of the following:-

i. State Bank of India; or

ii. Any scheduled bank; or

iii. Any other banking company; or

iv. Financial Institution; or

v. Central Government; or

vi. State Government; or

vii. Corporation held by the Central or State Government; or

viii. Trustees who have filed the declarations.

d. A standard format can be used as the instrument of transfer for transferring of shares.

• To get the AOA in case of shares, trust deed in case of debentures and transfer deed registered either by the transferor and the transferee or on their behalf according to the Companies Act, 2013.
• As per the Indian Stamp Act and stamp duty notification, the transfer deed needs to have stamps.
• It is important to check the stamp affixed on the transfer deed is cancelled at the time of or before the signing of the transfer deed.
• Where approval for transfer takes place the person who is giving his signature, name and address must see the transferor and the transferee sign the share/debentures transfer deed in person.
• The transfer deed must be attached and sent to the company with relevant share/debenture certificate or allotment letter in it.
• If the application by transferor is for partly paid shares, the company has to duly notify the amount due on shares/debentures to the transferee. No objection from the transferee is mandatory within two weeks from the date of receipt of the said notice.
• The same value stamp on a written application must be affixed if signed transfer deed is not available or lost.
• The company cannot charge any fee for registration of transfers of shares and debentures If the shares of the company are listed in a recognized stock exchange.

Penalties

For company minimum is Rs. 25000 and maximum is Rs. 5, 00,000.