Transfer of shares means the voluntary handing over of the rights and possibly, the duties of a member (as represented in a share of the company) from a shareholder who wishes to not be a member in the company any more to a person who wishes of becoming a member. Thus, shares in a company are transferable like any other movable property in the absence of any expressed restrictions under the articles of the company.

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.

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 need 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.

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.

Note: A company shall not register a transfer of partly paid shares in these two cases:

  • The company has given a notice in Form No. SH.5 to the transferee
  • Till the transferee has given a no objection certificate to the transfer within two (2) weeks from the date he recieved the notice from the company.

 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)

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.

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.

4. Then the shareholder who wants to transfer his share can submit the share transfer deed duly executed to the Company.

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)

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

————————————

 

NOTICE BY TRANSFEROR

Date:  12/12/2018

To,

The Board of Directors

ABC Private Limited

Bapu Nagar

Jaipur: 01

Sub: Request for transfer of 100 Equity Shares

This is to inform you that I,Henry, the authorized representative of ____________, the Shareholder of ABC Private Limited request you to transfer my 100 Equity Shares held in the Company for a total consideration of Rs.10,000 (Rupees Ten 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 100 Equity Shares in favor of any person at a same or higher price as per the Articles of Association of the Company.

Thanking you,

On Behalf of ____________

…. ……………………

(Authorized Representative)

———————————

“LETTER OF OFFER”

Date: 12/12/2018

To,

The Member

Mr. Henry

…….

We would like to inform that __________________, the Shareholder of our Company proposed to transfer its 100 (Hundred Only) Equity Shares, held in the Company having face value of Rs.10/- each at a premium of Rs. 90 each, amounting to a total consideration of Rs.10,000 (Rupees Ten 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 ABC Private Limited

Bapu Nagar

Jaipur: 01

(Director)

DIN: ………………

CERTIFIED TRUE COPY OF THE RESOLUTION PASSED AT THE MEETING OF THE BOARD OF DIRECTORS OF M/S SHIV PRIVATE LIMITED HELD AT THE REGISTERED OFFICE OF THE COMPANY AT BAPU NAGR JAIPUR:302019 ON 28TH FEBRUARY, 2018 AT 5:00 PM.

APPROVAL OF TRANSFER OF THE SHARES

“RESOLVED THAT pursuant to provisions of section 56 and other applicable sections of the Companies Act, 2013 and also subject to Articles of Association of the Company, the consent of Board, be and is hereby accorded to approve transfer of equity shares, whose details given below;

Transferor Folio No. Transfree Folio No. No. of Shares Share Certificate No.
Kumar 1 Devi 005 1000 0010
Kumar 1 Kumari 006 1000 0011

 RESOLVED FURTHER THAT any Director of the Company, be and is further authorised to transfer the shares to the transferee of the Company whose name is to be entered in the register of the Company and to make necessary endorsement on the reverse of the share certificate

\\ Certified to be True //

For Shiv Private Limited

Director                                                                             

DIN:   

Date: 28/02/2019

Place: Jaipur

TIME LIMITS IN CASE OF SHARE TRANSFER

1. A Company having share capital:- The Company shall not register transfer of securities of the Company or member’s interest in the Company other than beneficial owners without a proper instrument of transfer within a period of 60 days from the date of execution.

2. Application by transferor alone:- The transfer shall not be registered until and unless the company gives notice of the application to transferor and transferee gives no objection certificate within 2 weeks from receipt of the notice.

3. Company shall deliver certificates of all securities allotted/ transferred/ transmitted in the following cases and within the following mentioned time limits:-

In case of subscribers to memorandum – within a period of 2 months from the date of incorporation.

  • In case of allotment of any of its shares – within a period of 2 months from allotment date.
  • Receipt by the company of the instrument of transfer/ intimation of transmission – within a period of 1 month from the date of receipt.
  • Allotment of debenture – within a period of 6 months from the date of allotment.

Penalty for Non-compliance

As per the provisions of the Act, where there is a non-compliance by the company of the provisions relating to the transfer of shares, the company shall be punishable with the fine not less than Twenty-Five Thousand Rupees but which may extend to Five Lac Rupees and every officer in default will be punishable by a fine not less than Ten Thousand Rupees but which may extend to One Lac Rupees.

Author Bio

Qualification: CS
Company: N/A
Location: Jaipur, Rajasthan, IN
Member Since: 26 Sep 2017 | Total Posts: 21
CS Annu Sharma is a Commerce Graduate and an Associate Member of the Institute of Company Secretaries of India (ICSI). She has cumulative experience of more than 3 years with Listed Company, CA and CS firms. She authored various articles on the topics of Corporate Laws, Securities Laws, DGFT, I View Full Profile

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