Transfer of shares – Procedure in India under Companies Act 2013

Transfer of shares -Procedure in India under Companies Act 2013

Shares in a company are transferrable like any other movable property in absence of any restriction under the articles of the Company.

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 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 send 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 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 received the notice from the company.

The Procedure for T ransfer of shares in a Private Company:

Articles of the Company or their association govern the share transfer procedure in private limited company.

Steps to transfer of shares in a Private Limited Company:

• There is restriction for private Companies under Companies Act, 2013 regarding transfer of shares, So members who want to transfer his share shall place a request to company that he is willing to transfer his shares 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.
• 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.
• 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.
• Then the shareholder who wants to transfer his share can submit the share transfer deed duly executed to the Company.
• After receiving the Share Transfer deed along with Share Certificate Company need to pass a Board Resolution & register the entry for transfer of share.

Stamp Duty on Transfer of Shares

Share transfer form need to be duly stamped, as per Companies Act, 2013 also stamp should have adequate value with the date.

It should also be cancelled in accordance with section 12 of the Indian stamp Act, when you have to send the share transfer form is to be sent to the board of directors.

The seller of the shares has to pay the stamp duty at the rate of Rs 0.25 for every Rs. 100 worth of shares. For stamping purpose in a transfer of shares special adhesive stamps having the word ‘share transfer’ shall be used.

Section 8A of the Indian Stamp Act provides that for the electronic share transfer form, India. You can pay the stamp duty on the total amount of issuing the shares or securities.

• Documents under Share Transfer:

• Notice by transferor to the Company.
• Board Resolution for considering the Notice by transferor to company.
• Letter of offer made by company to the existing shareholder.
• Dissent letter from existing shareholder.
• Share Transfer deed in SH-4 form along with stamp duty paid.
• Share Certificates
• Board Resolution for registering transfer of shares.

Time Limit:

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.

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.

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.

Penalties

For company – Minimum is Rs. 25,000 and maximum is Rs. 5,00,000 For an officer In default – Minimum is Rs. 10,000; and maximum is Rs. 1,00,000