Provisions of Transfer of Shares under Companies Act 2013

A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared goals. In India, a Company means “company” means a company incorporated under this Act or under any previous company law.

A company issues shares to each of its members which represent that that they hold such part of company and a person/entity holding such shares are known as shareholders. From time to time there are certain situations where an existing shareholder wanted to transfer their shares of respective company to other person/entity.

What provisions cover the share transfer?

The provisions for share transfer are governed by section 56 of The Companies Act, 2013 and The Companies (Share Capital and Debentures) Rules, 2014.

What is share?

As per Companies Act, 2013 “share” means a share in the share capital of a company and includes stock. A share is an indivisible unit of capital, expressing the ownership relationship between the company and the shareholder. The denominated value of a share is its face value, and the total of the face value of issued shares represent the capital of a company, which may not reflect the market value of those shares.

What is share transfer?

A share transfer is the process of transferring existing shares, its related rights and liabilities from one person to another.

A transfer of share can only be transferred for only existing shares and from existing shareholders. Though the transferee can be existing shareholder or not of company.

What is the process to transfer shares?

The following is the process to transfer the Shares step wise: –

• Meeting between transferor and transferee for transfer of shares.
• Execution of Share transfer deed in SH-4 (Format attached) duly executed, signed and stamped by transferor and transferee as per Law.
• Either transferee or transferor will send share transfer deed along with original certificates or letter of allotment of securities (if no certificate is given to shareholder) to the Company at the registered office in case of unlisted Company and to Registrar of Companies (RTA) in case of listed company within a period of sixty days from the date of execution.
• The Company within a period of one month from the date of receipt by the company of the instrument of transfer shall register the transfer and issue the new share certificate to transferee.
• The Company will update its register of members accordingly.

What documents are required to transfer the share?

The following documents will be required to give effect for transfer of shares:-

• Original share certificate(s) of transferor
• Self-attested copy of PAN card of Transferor(s) (i.e. sellers) and Transferee(s) (i.e. buyers)
• Pay appropriate stamp duty @0.25% on market value by way of franking or affix share transfer stamps.
• Form SH-4 duly filled and signed.

What if documents are not completed for transfer of shares?

A company can refuse to transfer the shares in case the above documents are not furnished. Such intimation for refusal along with reason has to be intimated to transferor and transferee within thirty (30) days from the receipt of share transfer deed.

What if transfer is not done as per provisions?

If a company fails to abide by law then the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.

FORMAT OF SH-4

Date of execution………………………………..

FOR THE CONSIDERATION stated below the “Transferor(s)” named do hereby transfer tothe “Transferee(s)” named the securities specified below subject to the conditions on which the said securities are now held by the Transferor(s) and the Transferee(s) dohereby agree to accept and hold the said securities subject to the conditions aforesaid.

CIN:

Name of the company (in full):

Name of the Stock Exchange where the company is listed, if any:

DESCRIPTION OF SECURITIES:

–

–

TRANSFEROR’S PARTICULARS

TRANSFEREE’S PARTICULARS-

Folio No. of Transferee  : ________________     Specimen Signature of Transferee

Existing Folio No. If any

1._____________________________

2._____________________________

Value of stamp affixed:____________(Rs.)           3._____________________________

Enclosures:

• Certificate of shares or debentures or other securities
• If no certificate is issued, letter of allotment.
• Copy of PAN CARD of all the Transferees (For all listed Cos).
• Other, Specify…………………….

Stamps:

For office use only

Checked by______________________ Signature tallies by ____________________________

Entered in the Register of Transfer on _________________vide Transfer No._______________ Approval Date___________ Power of attorney/Probate/Death Certificate/Letter of administration Registered on _________________________________________

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Disclaimer: – The above article is prepared keeping in mind various provisions relating to transfer of shares under the Companies Act, 2013 and rules made thereunder. The author has tried to cover all the important and basic question relating to transfer of shares thereunder. Under no circumstance, the author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.

(The Author is Corporate Consultant and provides varied array of services including Start-ups mentor, Secretarial, Legal, Trademark, taxation, Audit, GST, Book keeping and other ancillary advisory service in Delhi, Chandigarh as well as The National Capital Region (NCR) and can be contacted through email id:- [email protected] and Contact Number: 91-8178515005).