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There may be times when you want to change the share structure of your company; either by adding a new shareholder or by changing the existing proportion of shares between shareholders. A share transfer is the process of transferring existing shares from one person to another; either by sale or gift.

The securities of a company including the shares are generally freely transferable. Transfer of shares of the private company is governed by the articles of the company. Companies Act, 2013 provides for the procedure of transfer of shares by both public and the private company. The form sh 4 for transfer of share needs to be filled.

One of the important features of the securities of a company is their transferability. Companies Act, 2013 under Section 44 provides that the shares, debentures or other interest of the member of a company are moveable property and hence are transferable in the manner as provided in the company’s articles of association.

Generally, securities of a company are freely transferable though there may be certain restrictions imposed on the transfer of shares of the private company as provided in their articles. Such restrictions, if any are added to protect the interest of shareholders and other security holders. Section 56 of the Companies Act, 2013 provides that the transfer of shares of the company and other securities will be registered by a company only when a proper instrument of transfer of shares (share transfer form) is filed as prescribed in the Form No. SH 4. The form sh 4 for transfer of share needs to be duly stamped, with adequate value, dated and executed by or on behalf of the transferor and the transferee.

Form Sh 4 is needed to be sent to the company by the transferor or the transferee of the shares within sixty days from the date of execution of share transfer agreement along with the share transfer certificate or certificate relating to securities. In case there is no such share transfer certificate, the application for transfer of shares must be sent along with the letter of allotment of securities.

Transfer of shares partly paid shall not be registered by the company unless a notice in the form SH 5 has been issued to the buyer of shares and has obtained a No Objection Letter from the buyer within two weeks from the date of receipt of a notice.

 We will discuss what is meant by restriction for transfer of share in case of PVT Company. Restriction means that share can not to be transfer directly to other non member & we have to follow the following procedure for transfer of share in a Private Company.

1. As there is restriction for private companies under Companies Act, 2013 regarding transfer of shares, So firstly the member who want to transfer his share shall place a request to company that he is willing to transfer his shares that can be offered to existing members of the company.(format attached as annexure-a)

2. After receiving notice of intention to transfer the share then this agenda shall be transacted at Board Meeting & a notice to all other existing member will be sent regarding purchase of share.( Annexure-B)

3. If no other existing member is ready to purchase share then company shall send the letter to the member who want to sell his share stating that now he can transfer the share to non –existing member. (ANNEXURE-C)

4. Then the shareholder who wants to transfer his share can submit the share transfer deed duly executed to the Company.( Annexure-D)

5. After receiving the Share Transfer deed along with Share Certificate Company need to pass a Board Resolution & register the entry for transfer of share. (Annexure-E)

Documentation

1. Notice by transferor to Company

2. Board Resolution for considering the Notice by transferor to Company

3. Letter of Offer made by company to existing shareholder

4. Dissent letter from existing shareholders

5. Share Transfer Deed in SH-4 form along with stamp duty paid

6. Share certificates

7. Board resolution for registering transfer of shares

Annexure-A

Date: 

To,

The Board of Directors

________________

11, Babar Lane, Bengali Market,

New Delhi-110001

Sub: Request for transfer of ………….Equity Shares

This is to inform you that I,………………, the authorized representative of ____________, the Shareholder of ………………. request you to transfer my 6425 Equity Shares held in the Company for a total consideration of Rs.12,85,000 (Rupees Twelve Lakh Eighty Five thousand only) by making first offer to the other existing shareholder of the Company, as required by the Articles of Association of the Company.

This is to further inform you that in case the existing shareholder refuses to buy the offered shares then I request you to kindly allow me to transfer the said 6425 Equity Shares in favor of any person at a same or higher price as per Article __ of the Articles of Association of the Company.

Thanking you,

On Behalf of ____________

…. ……………………

(Authorized Representative)

Annexure-B

Date: 11.03.2017

To,

The Member

———

…….

LETTER OF OFFER

We would like to inform that __________________, the Shareholder of our Company proposed to transfer its 6425 (Six Thousand Four Hundred and Twenty Five Only) Equity Shares, held in the Company having face value of Rs.10/- each at a premium of Rs. 190 each, amounting to a total consideration of Rs.12,85,000 (Rupees Twelve Lakh and Eighty Five thousand only) to the other existing shareholder of the Company.

Pursuant to Article 7 of the Articles of Association of the Company, the other existing Equity shareholders of ASF Infrastructure Private Limited who are willing and wish to avail the said offer may accept by notice in writing. However, failing such acceptance, the offer shall be deemed to be declined and the Board of Directors may proceed to allow him to transfer this equity share to any person/(s) at the same or higher price.

Certified True Copy

For ……………. Private Limited

………..

(Director)

DIN: ………………

Annexure-C

Date: 18.03.2017

 

 

To,

…………….

……………………..

Sub: Intimation for the transfer of shares

This is in reference to dissent letters dated 15th March, 2017; the Company would like to inform that none of the existing shareholder wishes to buy the shares offered by you. Therefore, as per Article 7 of the Articles of Association of the Company, you may transfer your 6425 Equity Shares to any other non-existing shareholder.

For …………… Private Limited

………………

(Director)

DIN: ……………..

Annexure-D

Form No. SH-4

Securities Transfer Form

[Pursuant to section 56 of the Companies Act, 2013 and sub-rule (1) of rule 11 of the Companies (Share Capital and Debentures) Rules 2014]

Date of execution: 01.10.2016

FOR THE CONSIDERATION stated below the “Transferor(s)” named do hereby transfer to the “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) do hereby agree to accept and hold the said securities subject to the conditions aforesaid.

CIN: …………….

Name of the company (in full): ………………. PRIVATE LIMITED

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

DESCRIPTION OF SECURITIES:

Kind/Class of Securities

(1)

Nominal value of each unit of security

(2)

Amount called up per unit of security

(3)

Amount paid up per unit of security

(4)

Equity Shares Rs.10/- Rs. 10/- Rs. 10/-

No. of securities being transferred Consideration received (Rs.)
In figures In words In words In figures
1,10,000 One Lakh Ten Thousand Two Lakh Seventy Five Thousand 2,75,000

Distinctive Number From 129521 189521
To 189520 239520
Corresponding Certificate No. 17 18

Transferor’s Particulars
Registered Folio Number: 07
S.No Name(s) in full Signature(s)
1. Abhinav Leasing and Finance Limited  

 

I, hereby confirm that the Transferor has signed before me.

Signature of witness:

Name and address:

Transferee’s Particulars-

Name in full Father’s/Mother’s/Spouse name Address & Email ID Occupation Existing folio No., if any Signature
(1) (2) (3) (4) (5) (6)
…….. ……. ………… Business 14

Folio No. of Transferee: 14                           Specimen Signature of Transferee

Value of stamp affixed: Rs. 688

(Rs. Six Hundred Eighty Eight)

Stamps

Enclosures:

(1) Certificate of shares or debentures or other securities

(2) If no certificate is issued, letter of allotment.

(3) Others, specify

For office use only

Checked by……………..

Signature tallied by……………………….

Entered in the Register of Transfer on …………….. vide Transfer No. …….

Approval Date ………………..

Power of attorney / Probate / Death Certificate / Letter of Administration Registered on ……………….. at No…………………………..

On the reverse page of the certificate

Name of the Transferor          Name of the Transferee                 No. of shares

 

Date of Transfer                     Signature of the authorized signatory

Annexure-E

Certified True Copy of the resolution passed at the 153rd meeting of the Board of Directors of ….. Private Limited held on Wednesday, the 22nd day of March, 2017 at 11.00 A.M at a shorter notice at its Registered Office at ………………

TRANSFER OF SHARES

“RESOLVED THAT pursuant to the provisions of Section 56 of the Companies Act, 2013 and all other applicable provisions thereof read with the Articles of Association of the Company, transfer of 6425 Equity Shares of Rs. 10 /- each (Rupees Ten only) at a Premium of Rs. 190/- each (Rupees One Hundred Ninety only) of the respective shareholder as per the entries made in the Share Transfer Register produced at this Meeting be and is hereby approved as follows:

Transfer No. Name of Transferor Name of Transferee No. of Shares Distinctive No.’s Transaction Value
T-24 ……….. ……….. 6425 201-6625  

12,85,000

 RESOLVED FURTHER THAT any of the Directors of the Company be and is hereby authorized to make necessary endorsement on reverse of Share Certificates and to do all other necessary act in this regard to give effect to the aforesaid resolution.

Certified True Copy

For ………… Private Limited

…………

 (Director)

 DIN: …………

Author Bio

YOGESH GUPTA is founder of E & A CONSULTANTS LLP, Yogesh Gupta & Associates, He is a LAW Graduate, CA and CS. He has cumulative experience of more than 7 years with Listed Company, Chartered Accountants and Company Secretaries firms. Yogesh Gupta is a Learner, Researcher, and Author. He a View Full Profile

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4 Comments

  1. Surendra Shyam Arora says:

    Thanks for sharing valuable information regarding share transfer. Keep posting and updating.

    Thanks
    CA Surendra Shyam Arora

  2. SANTOSH KUMAR says:

    Hello sir,
    please Assist me regarding to error occurred in last 3 FY annual return (AR) field by auditor of company, in such AR auditor has been shown the subscribed capital 300000 instead of 600000.
    Now please give me proper solution how to correct that error.

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