Free transferability of share is one essential condition for Company form of business, subject to some restrictions under private companies. New Act, deals with substantially.
Statutory provisions related to transfer of share one should refer the following sources:
Generally a Private Company is guided by its Article of Association. As per Section 2(68) of Companies Act, 2013 Private Company restricts the transfer of shares and prohibit invitation to public to subscribe to any securities of the Company.
IMPORTANT:
PROCEDURE FOR TRANSFER OF SHARES BY PRIVATE LIMITED COMPANY:
A. INTIMATION:
Transferor should give a notice in writing for his intention to transfer his share to the company.
B. DUTY OF THE COMPANY:
C. EXECUTION FORM: Get the Share transfer deed in form SH-4 duly executed both by the transferor and the transferee. SH-4 should be
Time Period for deposit of Instrument for Transfer With Company
Value of share transfer stamps to be affixed on the transfer deed:
Stamp duty for transfer of shares is 25 paisa 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.
D. SHARE CERTIFICATE AND LETTER OF ALLOTMENT:
Share certificate must be lodged with the company, or if no such share certificate exists then a letter of allotment must be lodged with the company along with the instrument of transfer.
E. BOARD RESOLUTION: Once the company will receive share transfer deed along with requisite documents then company will check the deed and documents then pass resolution for acceptance of same in the Board Meeting of the Company. After passing of Board resolution enter the name of transferee in the register of member as the beneficial owner of such shares. If the documentation for transfer of share is in order, board shall register the transfer by passing a resolution.
F. Delegation of Power: Authority to transfer of shares can be delegated to one director and he can consider as “one man committee”. The Board can place restrictions on powers of the Committee e.g. allowing transfer upto prescribed numbers- say upto 1,000 shares. The Board or committee can approve transfers by circular resolution also.
As per Listing Agreement: Powers of transfer should be delegated to an office or a committee or registrar and share transfer agent who should attend to the work at least once in fortnight.
G. ISSUE OF SHARE CERTIFICATE OF TRANSFER: The Company will within one month of passing of Board Resolution will issue share certificate in the favour of transferee. {56(4)(c)}. Company will endorse the name of Transferee behind the Share Certificates.
NOTE:
GIFT OF SHARES:
STAMP OF ‘ROC’ ON SHARE TRANSFER FORM:
TRANSFER OF SHARES AFTER EXPIRY OF 60 DAYS:
If the instrument of transfer doesn’t delivered within prescribed period (60 Days),
Duty of the Company:
1. Company can register transfer of Shares on the basis of “Indemnity Bond” as decided by Board of Directors of the Company.
2. As a precaution, company should send a registered letter to the transferor, inviting objection, if any.
3. If no reply is received within a reasonable period as prescribed in the notice, transfer may be affected on obtaining indemnity bond.
STAMP DUTY ON SHARE TRANSFER:
Cancellation of Stamp:
PROCEDURE FOR TRANSFER OF PARTLY PAID UP SHARES:
a) The transfer of partly paid shares to a person of whom they do not approve; or
b) Any transfer of shares on which the company has a lien
♣ SOME IMPORTANT POINTS:
♣ IN CASE OF REFUSAL BY COMPANY
♣ APPEAL AGAINST REFUSAL TO REGISTER TRANSFER BY PRIVATE COMPANY
♣ APPEAL AGAINST REFUSAL TO REGISTER TRANSFER BY PUBLIC COMPANY
or
♣ 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/
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 |
“RESOLVED FURTHER THAT (Name of Director), Director 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 regards to give effect to the above resolution.”
BARE ACT LANGUAGE:
“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.
Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at [email protected]).
(Republished with amendments)
Hi, you have stated that Transfer of shares on basis of family arrangement without complying with provision of Section 108 is valid.
Guess you meant section 56 as section 108 is under old Companies Act for share transfer. Request if you can further elaborate on this? Can the family settlement be submitted to the Company and can shares be transferred basis such settlement to the parties named thereunder? Also, since there is no cash consideration for transfer of such shares, is there stamp duty payable on such transfer and if yes on what value will stamp duty be computed. thanks
1.CA YOU TELL ME THE VALIDITY PERIOD OF A SHARE TRANSFER FORM.
2,CAN YOU TELL ME AS HOW LONG A BUYER CAN HOLD ON TOTHE SHARES HE BOUGHT BUT NOT TRANSFERESD IN HIS NAME
3. IN SHORT HOWLONG A BUYER OF SHARES SIT TIGHT ONHIS SHARES WITHOUT TRNASERRING THEM BUT CLAIMING HE IS THE OWNER OF THESE SHARES. IS IT 1 0R 3 YEARSOR NOTTHERE.WHAT IS THE LEGALIT OF THIS ISSUE KINDLY LETME KNIW REGARDS GEORGE
Dear Sir,
Firstly thank you so much for the clear cut explanation about step by step procedure of share transfer.
Now in case of transfer of shares in a private limited Company to the existing shareholder who is a foreign entity:
1) Form SH-4 will be executed physically through stamp paper, however is there any form to be filed with respect to the same ?
2) is there a necessity to form share transfer agreement in case of secondary transfer of shares?
Thank you in advance
What will the impact on physical transfer post stamp duty amendments which would become effective from April 2020
A person holds shares in two folios – 100 shares and 50 shares. He wants to transfer these to 3 transferees @ 50 to each. What procedure is to be followed:
1) Can the co receive the two scripts and issue 3 fresh scripts in the name of tranferees after cancelling the old ones? or
2) should the company first issue 3 scripts to the transferor and then transfer these to the transferees ?
1, CAN YOU TELL ME THE VALIDITY PERIOD OF SHARE TRASFER FORM
2.CAN YOU TELL ME WHAT IS THE VALIDITY PERIOD OF A BUYER HE CAN HOLD ON TOHIS SHARES WITHOUT REALLY TRANSFENG THEM IN HIS NAME
3, CAN THE BUYER CAN CLAIM THE OWNERSHIP OF THESE SHARES AFTSR A PERIOD OF SAY 12 YEARS THAT HE OWNES THESE SHARES AND ASKS ME TO TRANSFER THEM IN HIS NAME.
WHAT ARE THE LEGAL ISSUES INVOLVED HERE
I THANK YU FOT YOUR HELP IN THIS REGARDS
GEORGE
Is any requirement to inform ROC by the company regarding transfer of shares? or
It is sufficient to mentioned in filling of Annual Return to the Company (MGT-7)
can a company transfer the shares much below the book value or the fair market value. what are the tax implications on buyer and seller in this case.
Please provide ref for the delegation of power for transfer of shares from companies act
Please provided appropriate reference from companies act, if any for delegation of power for transfer of shares
IF I WANT TO GIFT SHARES IN PHYSICAL FORM TO MY DAUGHTER WHAT WOULD BE THE VALUE OF SHARE TRANSFER STAMPS
Old share transfer deed re validation procedure and fees where remittance
My father wants to transfer physical shares of a non-traded company to my name. The valuation of transfer is zero in this case. There are multiple Folio numbers since these were physical shares issued by the company way back in 1990 and bonuses came with different sub-folio number.
Question:
1. Is stamp required and What should be the value of stamp
2. Should I fill multiple forms or one SH-4 is sufficient?
For transfer of physical shares, are copies of PAN Cards of all Transferors (self attested) also required to be sent to company’s Resistrar & Transfer Agent?
In this article, you have mentioned that transfer without consideration is VOID. later on you have mentioned that gifts of shares is valid? I just want to know that can shares be transferred by way of gift? If yes, what all the provisions are to be kept in mind.
Yes, shares can be transferred by means of Gift. In that case, the share transfer form has to be accompanied by a duly signed Gift Deed.
Is Pan card of transferor is mandatory for processing of share transfer work.
Old share transfer deed re validation procedure and fees where remittance
Sir may I know that is der any method to determine the price of share for transfer in private company
Do the transfer at current book value.Its the safest option, both in respect of Companies Act and IT Act
Hi. Helpful article.I want to transfer sum physical shares frm my parents’ name to my name. Does the term “consideration received” in SH4 mean I have to pay anything fr it?