Share transfer in a company
Shares of a company pass from one person to another by a stamped instrument of transfer. Company Suggestion prepares Form SH-4, the board approval and the new share certificate.
How are shares transferred?
Section 56 of the Companies Act, 2013 says a company registers a transfer of securities only when a proper instrument of transfer, duly stamped and signed by the transferor and the transferee, is delivered to it.
The prescribed instrument is Form SH-4. After the board approves the transfer, the company enters the transferee in the register of members and delivers the share certificate within two months.
Who can receive the shares?
Two limits apply in a private company.
- The articles may require the shares to be offered to existing members before an outsider.
- The company cannot end up with more than 200 members, apart from employee-members.
An LLP has no shares. A change of partners is an amendment of the LLP agreement, not an SH-4 transfer.
Which documents does the transfer need?
The board file has five papers.
- Form SH-4, signed by the transferor and the transferee
- The original share certificate, or a letter of allotment
- Proof that stamp duty has been paid
- PAN and identity proof of the transferee
- A board resolution approving the transfer
What are the transfer steps?
Company Suggestion completes a transfer in five steps.
- The articles are checked for any first offer to existing members.
- SH-4 is signed and stamp duty is paid.
- The board approves the transfer and the minutes record it.
- The register of members is updated.
- The new share certificate is delivered within two months.
Frequently asked questions
4 questions cover the rules that decide this registration.
Which form transfers shares?
Form SH-4, signed by the transferor and the transferee. It is the instrument of transfer under section 56.
Is stamp duty payable?
Yes. Duty is paid on the instrument at the rate the state Stamp Act sets for a share transfer. The rate is not the same in every state.
How long does the company have to issue the certificate?
Two months from the date of the transfer, under section 56(4).
Can a private company refuse a transfer?
The articles can restrict a transfer. The board follows those articles, including any right of existing members to be offered the shares first.