CS Ankur Garg

Through this write up we shall discuss another topic which is quite frequent for secretarial department of a Company. Statutory provisions related to transfer of share one should refer the following sources:

1. Section 56 of Companies Act, 2013

2. Rule 11 of Companies (Share Capital & Debentures) Rules 2014

3. Provisions given in model articles of association given in Table ‘F’ of Schedule-I

“Relevant” Text of Section 56 and Rule 11 are reproduced below for ready reference:

Transfer and transmission of securities

Section 56 (1) A company shall not register a transfer of securities of the company, or the interest of a member in the company in the case of a company having no share capital, other than the transfer between persons both of whose names are entered as holders of beneficial interest in the records of a depository, unless a proper instrument of transfer, in such form as may be prescribed, duly stamped, dated and executed by or on behalf of the transferor and the transferee and specifying the name, address and occupation, if any, of the transferee has been delivered to the company by the transferor or the transferee within a period of sixty days from the date of execution, along with the certificate relating to the securities, or if no such certificate is in existence, along with the letter of allotment of securities: 

Provided that where the instrument of transfer has been lost or the instrument of transfer has not been delivered within the prescribed period, the company may register the transfer on such terms as to indemnity as the Board may think fit.

(2) Nothing in sub-section (1) shall prejudice the power of the company to register, on receipt of an intimation of transmission of any right to securities by operation of law from any person to whom such right has been transmitted.

(3) Where an application is made by the transferor alone and relates to partly paid shares, the transfer shall not be registered, unless the company gives the notice of the application, in such manner as may be prescribed, to the transferee and the transferee gives no objection to the transfer within two weeks from the receipt of notice.

(4) Every company shall, unless prohibited by any provision of law or any order of Court, Tribunal or other authority, deliver the certificates of all securities allotted, transferred or transmitted—

(a) within a period of two months from the date of incorporation, in the case of subscribers to the memorandum;

(b) within a period of two months from the date of allotment, in the case of any allotment of any of its shares;

(c) within a period of one month from the date of receipt by the company of the instrument of transfer under sub-section (1) or, as the case may be, of the intimation of transmission under sub-section (2), in the case of a transfer or transmission of securities;

(d) within a period of six months from the date of allotment in the case of any allotment of debenture:

Provided that where the securities are dealt with in a depository, the company shall intimate the details of allotment of securities to depository immediately on allotment of such securities.

(5) The transfer of any security or other interest of a deceased person in a company made by his legal representative shall, even if the legal representative is not a holder thereof, be valid as if he had been the holder at the time of the execution of the instrument of transfer.

(6) Where any default is made in complying with the provisions of sub-sections (1) to (5), the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.

Rule 11 of Companies (Share Capital & Debentures) Rules 2014: Instrument of transfer.-

1. An instrument of transfer of securities held in physical form shall be in Form SH.4 and every instrument of transfer with the date of its execution specified thereon shall be delivered to the company within sixty (60) days from the date of such execution.

2. In the case of a company not having share capital, provisions of sub-rule (1) shall apply as if the references therein to securities were references instead to the interest of the member in the company.

3.  A company shall not register a transfer of partly paid shares, unless the company has given a notice in Form No. SH.5 to the transferee and the transferee has given no objection to the transfer within two weeks from the date of receipt of notice.

Main Provisions related to Transfer of Share

1. Instrument for Transfer of Share is compulsory: Section 56 provides that a company shall not register a transfer of shares of, the company, unless a proper transfer deed in Form SH.4 as given in Rule 11 of Companies (Share Capital & Debentures) Rules 2014 duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company, along with the certificate relating to the shares, or if no such certificate is in existence, along with the letter of allotment of the shares. You may download soft copy of Form No. SH.4 from the link given below:

Download Instrument for Transfer – Form No. SH.4

2. Time Period for deposit of Instrument for Transfer: An instrument of transfer of shares i.e. Form SH.4 with the date of its execution specified thereon shall be delivered to the company within sixty (60) days from the date of such execution by or on behalf of the transferor and by or on behalf of the transferee.

3. Value of share transfer stamps to be affixed on the transfer deed: Stamp duty for transfer of shares is 25 paise for every Rs. 100 or part thereof of the value of shares as per Notification No. SO 130(E), dated 28-01-2004 issued by the Ministry of Finance, Department of Revenue, New Delhi.

4. Time limit for issue of certificate on transfer (Section-56(4)): Every company, unless prohibited by any provision of law or of any order of any Court, Tribunal or other authority, shall, within One month deliver, the certificates of all shares transferred after the application for the registration of the transfer of any such shares, debentures or debenture stock received.

5. Private company shall restrict right to transfer its shares: Entire shareholding of a private company may be owned by a family or other private group. Section 2(58)(i) of the Companies Act, 2013 provides that the Articles of private company shall restrict the right to transfer the company’s shares.

6. Restriction on transfer in Private Company not applicable in certain cases: Restriction upon transfer of shares is in private company are not applicable in the following cases:—

(i) on the right of a member to transfer his/her shares cannot be applicable in a case where the shares are to be transferred to his/her representative(s).

(ii)in the event of death of a shareholder, legal representatives may require the registration of share in the names of heirs, on whom the shares have been devolved.

Note: Restriction should not be in the form of prohibition and Restriction can only be by the Articles of Association.

7. Time Limit for Refusal of registration of Transfer: Provisions related to Refusal of registration and appeal against refusal is given in Section 58 of the Companies Act, 2013. Power of refusal to register transfer of shares is to be exercised by the company within thirty (30) days from the date on which the instrument of transfer or the intimation of transfer, as the case may be is delivered to the company.

8. Time Limit for appeal against refusal to register Transfer by Private Company: As per section 58(3), a transferee of shares may appeal to the Tribunal against the refusal within a period of thirty (30) days from the date of receipt of the notice from the Company or in case no notice has been sent by the company, within a period of sixty (60) days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, was delivered to the company.

9. Time Limit for appeal against refusal to register Transfer by Public Company: As per section 58(4), a transferee of shares may, within a period of sixty (60) days of such refusal or where no intimation has been received from the company, within ninety (90) days of the delivery of the instrument of transfer or intimation of transmission, appeal to the Tribunal.

10. Penalty for Non-compliance: Where any default is made in complying with the provisions related to transfer of shares, the company shall be punishable with fine which shall not be less than Rs. 25,000/- but which may extend to Rs. 5,00,000/- and every officer of the company who is in default shall be punishable with fine which shall not be less than Rs. 10,000/- but which may extend to Rs. 1,00,000/-.

Basic Procedure for Transfer of Share in a Private Company

Generally articles contain the detailed provisions as regards the procedure for transfer of shares. Usually following steps shall be followed by a private company to give effect to the transfer of shares:—

  • Transferor should give a notice in writing for his intention to transfer his share to the company.
  • The company in turn should notify to other members as regards the availability of shares and the price at which such share would be available to them.
  • Such price is generally determined by the directors or the auditors of the company.
  • The company should also intimate to the members, the time limit within which they should communicate their option to purchase shares on transfer.
  • If none of the members comes forward to purchase shares then the shares can be transferred to an outsider and the company will have no option, other than to accept the transfer.
  • Get the Share transfer deed in form SH-4 duly executed both by the transferor and the transferee.
  • The transfer deed should bear stamps according to the Indian Stamp Act and Stamp Duty Notification in force in the State concerned. The present rate of transfer of shares is 25 Paise for every one hundred rupees of the value of shares or part thereof. Do not forget to cancel the stamps affixed at the time or before signing of the transfer deed.
  • The signatures of the transferor and the transferee in the share transfer deed must be witnessed by a person giving his signature, name and address.
  • Attach the relevant share certificate or allotment letter with the share transfer deed and deliver the same to the company. The share transfer deed should be deposited with the company within sixty (60) days from the date of such execution by or on behalf of the transferor and by or on behalf of the transferee.
  • After receipt of share transfer deed, board shall consider the same. If the documentation for transfer of share is in order, board shall register the transfer by passing a resolution.

Basic Procedure for Transfer of Share in a Public Company

Section 58(2) provides that the shares or debentures and any interest therein of a public company shall be freely transferable. Usually following steps shall be followed by a private company to give effect to the transfer of shares:—

  • Get the Share transfer deed in form SH-4 duly executed both by the transferor and the transferee.
  • The transfer deed should bear stamps according to the Indian Stamp Act and Stamp Duty Notification in force in the State concerned. The present rate of transfer of shares is 25 Paise for every one hundred rupees of the value of shares or part thereof. Do not forget to cancel the stamps affixed at the time or before signing of the transfer deed.
  • The signatures of the transferor and the transferee in the share transfer deed must be witnessed by a person giving his signature, name and address.
  • Attach the relevant share certificate or allotment letter with the share transfer deed and deliver the same to the company. The share transfer deed should be deposited with the company within sixty (60) days from the date of such execution by or on behalf of the transferor and by or on behalf of the transferee.
  • After receipt of share transfer deed, board shall consider the same. If the documentation for transfer of share is in order, board shall register the transfer by passing a resolution.

SECRETARIAL PRACTICE / DRAFTING

Sample Board Resolution for approval for transfer of share

The Chairperson informed the Board that Company has received 1 share transfer request, accompanied with share transfer deed duly filled in, signed and stamped along with other related documents, for approval of the transfer of shares of the Company. The matter was discussed and following resolution was passed unanimously:

“RESOLVED THAT the consent of the Board of Directors of the Company be and is hereby accorded for the transfer of equity shares as per the details given below:

  1. No.
Date of Registration of Transfer No. of Equity Shares Name of the Transferor Ledger Folio No.Transferor Name of the Transferee Ledger Folio No.Transferee
1. 01.09.2014 44,000 Mr. Prakash 33 Mr. Mohit 167

 “RESOLVED FURTHER THAT Mr. Rohit Bakshi, Company Secretary of the company be and is hereby authorized to make necessary endorsement on the reverse of the Share Certificate and to make entries in the register of share transfer and to do all other necessary act in this regard.to give effect to the above resolution.”

Disclaimer:   This write up is intended to start academic discussion on few significant interpretations under Companies Act, 2013. It is not intended to be a professional advice and should not be relied upon for real time professional facts. Readers are advised to refer relevant provision of law before applying or accepting any of the point mentioned above. Author accepts no responsibility whatsoever and will not be liable for any losses, claims or damages which may arise because of the contents of this write up.

I am hopeful that this write up would be of some help w.r.t. your professional working and endeavors under Companies Act, 2013. Kindly share your opinion.

I am hopeful that this write up would be of some help w.r.t. your professional working and endeavors under Companies Act, 2013. Kindly share your opinion.

(CS Ankur Garg – Connect through Facebook )

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50 responses to “Procedure for Transfer of Shares under Companies Act, 2013”

  1. pradeep mokale says:

    Both Transferor & Transferee having foreign address.
    We request you to kindly suggest what additional documents (RBI Permisson or any other supporting documents) we require for transfer of these shares.

  2. Mehak says:

    What is the effective date of transfer of shares in Private Company ?
    date of execution of transfer deed or
    date of registration of transfer by Board (i.e Date of BM)

  3. PRAVIN CHOURASIA says:

    What would be the procedure , if the NR transfer to NR of shares in Indian company , if FDI allow 100 %

  4. TCkatoch says:

    How to deal on death of share owner who has not
    left any will

    • Ankit Garg says:

      Sir, you’ll have to get a succession certificate from the court of competent jurisdiction if the value of shares is more than Rs. 2 lakhs. Only then can you stake a claim over the shares. If the value is less, kindly send a notarized copy of death certificate along with a request letter and other IDs to the registrar for effecting transmission.
      Regards,
      Ankit Garg
      Advocate
      ankitgarg.attorney@gmail.com
      Garg Law Chambers

  5. Rajneesh says:

    I am the joint holder of shares along with my father ( deceased ) now .How i can get transferred the same in my namer ?
    Can i give it to my depository for the demat purposes and transfer

  6. S Sethuraman says:

    How can I enter 30 share certificate particulars in one SH4?
    The folio number is one only. Pl. advise.

  7. Dharam Prakash Sharma says:

    I have 200 shares of one the listed company with old transfer deeds. Once deeds were re-validated long before in 2002. The registrar & Share transfer Agent returned them back with the objection that “transfer deed invalid”. Now they are demanding to Re-lodge the shares with new transfer form SH-4. The share broker and transferor is not traceable at their address. Now how can i transfer these shares into my name?

  8. R.GOPAL says:

    Sir,
    I am having 7 sc of LVB, intransfer form there are only 4 columns to enter dist. nos. How to enter 3 more cert. nos. Your response expected.R.GOPAL

  9. Rakesh Agarwal says:

    sir i have some shares of a company purchased in 2002 .I had send these for transfer into my name. The company has tra these shares in our address but the transferrorers are the same. now how can I transfer the shares into my name without fresh transfer deed

    • Vinod says:

      First of all you need to write to the Company/ RTA detailing the discrepancy/ error/ mistakes committed at their end. Let them rectify their mistake rather you rectifying it. For assistance you can get in touch with me at E-mail: adv.s@outlook.com

  10. Ashok K. Varma says:

    Dear Sirs,
    Are the signatures, require to be attested in Form SH4, if yes, who are authorised to do so.
    Regards
    A.K.Varma

  11. K SANKARANARAYANAN says:

    22. TRANSFER APPLICATIONS UNDER OLD TRANSFER FORMS–Require revalidation as per old Rules. If the company refuses to register, you can get a court order by proving your purchase and get directions from court for transfer in your name.

  12. Rajiv says:

    I have some shares with my friend as joint holder. How can we get these shares be converted to individual names. Pl guide. Thanks

  13. vaishnavi says:

    what is the procedure to transfer of shares of director holding 50% shares in chit fund private limited company..???

  14. Hitesh Soni says:

    i have bought shares in my friends demat account.. how can I transfer it in my demat account ? tell me the easiest procedure.

  15. Shubham Singhal says:

    Hello Sir,
    Could you please send the formats of letters required in transfer from intention of transferor to end. My email is shubhamca89@gmail.com

    It would be very helpful.

    Thanks!

  16. DEVANG PATEL says:

    DEVANG PATEL
    IN PHYSICAL SHARE TRANSFER TRANSFEREE & TRANSFEROR PAN CARD COMPOULSARY PLEASE GUIDE ME?

  17. B.K.Surendra says:

    As so I don’t want to transfer my share ,what would happen?

  18. TRISHA says:

    Dear Sir,

    My query :- my father passed away I am minor , me and my mother is kin ( my grandmother and grandfather are our family member) , my father has shares that how to transfer to my and my mother’s name, and also such shares have in private limited company which is in corporation since 2013, which shares are still not delivered at our address – what is the process please?
    Please Reply

  19. chenda says:

    I am holiding shares jointly as second name and now want to transfer this shares to my name.

    please let me know the procedure.

    regards

  20. Namrata says:

    When consideration for transfer of shares should be received? Is there any provision or any time after transfer form submitted to board? If consideration is in in kind of technology transfer, then whether any additional compliance is required?

  21. sudhir rathi says:

    Get it revalidated at ROC or contact seller and get new transfer deed

  22. sudhir rathi says:

    you will have to affix share transfer stamps @25paise for every Rs.100 and send to concern company or its Registrar and Transfer agent and not to ROC

  23. sudhir rathi says:

    Write to concern company and get procedure for transmission of share after you complete the procedure the shares will be transferred in your name

  24. Manu says:

    I have some shares jointly hold in demat account with my mother. I am the first holder and my mother is the second holder in the account. We want to transfer these shares to new demat account solely owned by me.Will there be any tax implication when I transfer the shares? What should be the reason code in DIS slip Transfer to own account” or gift?

  25. Amit Parmar says:

    i have a query of one of my client that her grand mother passed away and she has shares that he is looking to transfer to his name, and also such share have in private limited company – what is the process please?

    • Akhilesh Mishra says:

      Dear amit, in case of private company, the transmission of shares can take place only through the provisions of articles of association. It means after complying with provisions of articles in this regard you can effect the transmission.

  26. Rakhee says:

    My mother passed away and she has shares that Im looking to transfer to my name, Im her only child / heir – what is the process please? She had no demat account as far as I understand..

  27. HEMANT GANDHI says:

    I NEED SHARE TRANSFER STAMP FROM WHERE I CAN GET THAT IN MUMBAI.

  28. G.BALASUBRAMANIAN says:

    What is the implications on the income tax liability on me on the transfer of shares from other director.

  29. prerna shetty says:

    sir

    do we need to file form 35A on transfer of shares from one director to another in a vt Ltd company????

  30. dharmraj singh says:

    sir,
    if i want to transfer share.then transfer deed and share certificate are required to submit roc.tell me

  31. Ajay says:

    From where can we get share transfer stamps to be pasted on SH-4 Securities Transfer form in MUMBAI.
    Ajay Narechania

  32. sanjay shukla says:

    Sir,
    our campany is a private ltd. one partner want to leave company and want to transfer share.
    what is procedure

  33. Prem says:

    Please tell me what about the old deed which were transferred 10-15 Years ago .Since clause of revalidation of deed in new concept .I have more than 200 scrips of good companies .But we are unable to transfer these deeds in my name. Please guide

  34. Shilpy aggarwal says:

    my query is a pvt. ltd . has 1000000 Rs. as authorised capital and rs. 100000 as paid up capital. co. has three shareholders. further 5 people want to invest and have shares and equity right in a company. but company does not want to increase authorised capital. and company to issue shares those people.. what is the solution????

  35. Ashwani says:

    If transfer deed executed before 31st March 2000 is valid for transfer.
    without re validation ( Period extension stooped from 01/01/2015).
    What is the procedure/status of physical shares purchased/executed before March 2014.

  36. R.Lobo says:

    Sir,

    Can a director of a private limited company registered in 2002,transfer his shares for a consideration to his wife who is not a member or employee or director of the company under the companies act 2013. If yes, What is the procedure for the same.

    Also,the wife is a shareholder of another company, can the shares owned by her be purchased by a private limited company

  37. Ajmal Ansari says:

    What is the procedure for transfer of share to a foreign holding company. Is there any additional doc shall be filed to RBI.

  38. shilpa jain says:

    In case of private company share transfer, why is the share valuation required. The shareholder will propose an amount at which it is willing to sell and the if the purchaser finds the price ok then he may go ahead and buy. Therefore why at all share valuation is required. Moreover if it is required also it will be for the use of the seller. SO why id the companies auditor or director doing the share valuation.

  39. S.Khan says:

    You are awesome ! Thanks

  40. Bhupen hatkar says:

    Dear Sir,

    my query: in case of public company, is it necessary to hold Board meeting in every month as company needs to issue share certificate/transfer shares within one month. Please reply.

  41. Saurabh Mishra says:

    You mean to refer to Section 2(68)(i) of the New Act, and not 2(58)(i). Kindly edit.

  42. Bina Ipe says:

    Is there any return required to be filed in form PAS 3?

  43. Ankit says:

    What would the procedure be in case shares are held in demat form?

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