If the Company is having Share capital, then firstly the question of transferability of share capital arises. So, to transfer shares there is Company Law which governs the transfer.
These are provisions of Companies Act, 2013 which has to be kept in mind while transfering the share.
- Section 56 and
- Section 88
As per 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:
(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.
As per section 56(4)(c) Every company shall, unless prohibited by any provision of law or any order of Court, Tribunal or other authority, deliver the certificates of all transfer 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 of securities;
(6) Where any default is made in complying with the provisions of sub-sections (1) to (5), the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.
As per section 88-
Every Company shall make entry into the Register of Members and Register of Transfer of the transaction i.e. transfer.
and as per Rule 5(1) of The Companies (Management and Administration)Rules, 2014; The entries in the registers maintained under section 88 shall be made within seven days after the Board of Directors or its duly constituted committee approves the allotment or transfer of shares, debentures or any other securities, as the case may be.
This is the procedure to transfer the shares in case of private company-
- Firstly the valuation of shares of the company can be done by mutual consent or if they agree by a registered valuer, and accordingly the value of share if agreed should be considered between the transferor and the transferee.
- After agreeing with the valuation of shares the Instrument of transfer i.e.SH-4 should be filled with following information-
1. Date of execution.
2. Name, address, fathers name, folio no., no.of shares transferred of transferor should be entered.
3. Name, address, fathers name, folio no. of transferee should be entered.
4. Nominal value of shares and the agreed value of share transfer should be entered in the consideration.
5. Particulars of share certificate should be entered of which transfer is made i.e. certificate no., distinctive no. and number of shares.
- Then after signing the SH-4 it should be stamped with adhesive type stamp of the .25% value of the consideration with “Share Transfer” written on it and after affixing it should be cancelled.
- Then along with the SH-4 and Share certificates (Original) it should be sent to the company within 60 days from the date of the execution.
- After receiving the SH-4 and original share certificates the company should call a board meeting and to Issue notice of the BM with agenda to consider and if thought fit to approve the transfer of shares.
- The company should convene the BM on the date fixed in agenda to consider and if thought fit to approve the share transfer.
- After approving the transfer in BM the Board should authorize a person to endorse the name of the transferee on the back of the share certificate and to enter the name of the transferee in the Register of Members within 7 days from the date of the BM for approval of transfer as per Rule 5(1) of The Companies (Management and Administration)Rules, 2014.
- The Company should provide the Share certificate to transferee within 1 month from the receipt of the instrument of transfer.
Author Bio
do valuation certificate needed for share transfer in private company?
Dear Abhishek,
In respect of private companies, valuation of shares is not mandatory. If the consideration value is agreed by both transferor and transferee transfer can be done at that value or par value of shares.
what will be the date of transfer i.e. date of execution or date of BM in which transfer approved?
The date of transfer will be the date of BM in which transfer was approved.
very informative and cleared all doubts relating to transfers. Thank you.