Understanding the rules and procedures governing the transfer of shares is fundamental for investors, shareholders, and corporate professionals alike. In this article, we dissect the regulations and step-by-step processes of share transfers in listed companies, unlisted public companies, and private companies in India.

Allowability of transfer of shares for Listed Company (Equity listed), Unlisted Public company and Private company

Nature of Company Whether transfer of shares allowed and if yes in what form? Provisions
Listed Company (Equity listed) For listed companies, transfers of shares held in physical form are not permitted. However, shares held in a dematerialized (demat) form can be transferred. There are exemptions where physical share certificates can be tendered in buybacks through tender offer, open offers, and exit offers in cases of voluntary or compulsory delisting 1st proviso to Reg. 40(1).

SEBI circular dt: July 31, 2020

Unlisted Public company Post October 2, 2018, any holder of securities in an unlisted public company intending to transfer shares must ensure the securities are in demat form. The transfer procedure at the depository level doesn’t require permission from the company (Rule 9(3) of Companies (Prospectus and Allotment of Securities) Rules, 2014). Rule 9(3) of Companies (Prospectus and Allotment of Securities) Rules, 2014
Private company In private companies, transfer of physical shares is permissible Section 56(1) of Companies Act, 2013 and   Companies (share Capital and Debenture) Rules, 2014 framed under Companies Act, 2013

Process for transfer of shares of Public Company in demat form

Process for transfer of Shares of unlisted public co. –

Rule 9(3) of Companies (Prospectus and Allotment of Securities) Rules, 2014

For public companies, the transfer of shares from one Demat account to another involves a four-step process that includes filling the Delivery Instruction Slip (DIS), forwarding it to the current broker, and then to the depository, and finally, reflecting the transferred shares in the new Demat account.

Process of transfer of shares from one Demat account to another in case of public company:

Step 1 – The investor fills the DIS (Delivery Instruction Slip) and submits it to the current broker.

Step 2 – The broker forwards the DIS form or request to the depository

Step 3 – The Depository will transfer your existing shares to the Demat account

Step 4 – Once all the shares are transferred, the same will be reflected in the investor’s new Demat account.

When an investor opens a Demat account with a stockbroker, he is provided with a delivery instruction slip or DIS along with the welcome kit. Here are the fields to watch out for, while filling in the details in DIS:

1.  Target Client ID: It is a 16-digit identification number that is allocated to the investor. It is the broker’s ID, also known as Beneficiary Owner ID (BO ID)

2.  ISIN: International Securities Identification Number or ISIN as is 12 digits long. It assists in identifying securities like stocks, equities, notes bonds, funds, etc. It should be mentioned in the slip, along with details of the shares with the quantity.

3.  DP Name: Here, the name of the stockbroker or Depository Participant must be mentioned.

4.  Inter Depository: This blank is required to be filled up if the investor wants to transfer shares from one depository to another.

5.  Off Market: This space is filled up for carrying out the transfer of shares within the same depository.

Once all the required information have been filled up and the investor has signed the DIS, the following are the final steps:

1.  Submission of signed DIS to the current broker by the investor.

2.  The investor should take the due acknowledgement receipt of the DIS from the broker.

3.  After this, the broker will require some days to transfer the shares to the investor’s Demat account with the new broker.

Transfer of shares of a private company A Company shall not register any Transfer unless a proper instrument of Transfer held in physical form in Form No. SH-4 duly stamped, dated and executed by or on behalf of Transferor and the Transferee. Stamp duty is payable as per Indian Stamp Act, 1899. Further post January 2020 stamp duty is payable online.

Procedure for transfer of shares of a private company entails a comprehensive six-step process that includes a formal request from the transferor, notification to existing members, possible sale to non-members, submission of a duly executed and stamped Form No. SH-4, board approval, and finally, registration of the new share owner in the members’ register.

Procedure for transfer of shares of a private company:

1. Transferor will request the Company to Transfer his shares

2. The Company will sent Notice to all existing members that the above mentioned shareholder has shown his intention to transfer his shares

3. If no existing Member has shown interest then Company will intimate the Transferor that he can sell his shares to non-member.

4. The Transferor will submit SH-4 duly executed, dated and stamped to the Company. After submitting same, the Company will verify the contents of the SH-4. And if it finds everything is in place then it will place the same before the approving authority Board Resolution approving Transfer of shares and a resolution would be passed approving the transfer of shares.

5. On approving share transfer at board meeting register the transfer of shares and issue the endorsed share certificate to the Transferee within one month of receipt of Instrument of Transfer.

6. Once this resolution is passed register of members shall be updated with new names.

Conclusion: The laws and processes of share transfers vary considerably among listed, unlisted public, and private companies. Understanding these distinctions is vital for both individuals and corporate entities participating in India’s vibrant financial and corporate landscape. By complying with these rules, companies can ensure a smooth transition of ownership rights, maintain transparency, and uphold the shareholders’ interests.


Disclaimer: This article provides general information existing at the time of preparation and we take no responsibility to update it with the subsequent changes in the law. The article is intended as a news update and Affluence Advisory neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this article. It is recommended that professional advice be taken based on specific facts and circumstances. This article does not substitute the need to refer to the original pronouncement

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September 2023