Share Transfer

The ownership of a Private Limited Company in India is decided by the shareholding of the Company. For inducting new investors or transferring the ownership of the company the shares of the company need to be transferred. The company’s interest could be sold to attract new investors or to pass control of the company.

An important characteristic of the company is that the shares can be transferred. The shares or the debentures are movable property, they are transferable as they are provided by the articles of the company, especially the shares of any members of a public company.

The share transfer is possible only through a contract or arrangement between two or more persons. The provisions of the Companies Act majorly deal with the transfer and transmission of securities. The transmission of the securities due to death, succession, inheritance, bankruptcy, etc. The transfer of securities is possible through any contract or arrangement between two or more persons. The provisions of the Companies Act deal with the transfer and transmission of securities.

Transmissions of the securities mean the loss of titles on these securities due to death, succession, inheritance, bankruptcy, etc.

What is a share transfer?

Transfer of shares means handing the rights and possibly the duties of a company member voluntarily. The rights and the duties of the share transfer happen from the shareholder who is wishing to not be a member of the company anymore to a person who is willing to be a member of the company.

Thus the shares in a company are transferable like any other movable property in the absence of the expressed restrictions under the Articles of the Company.

Who is involved in Share transfer?
  • Subscribers to the memorandum
  • The legal representative in the case of a deceased
  • Transferor
  • Transferee
  • Company (Whether listed or unlisted)
Procedure to transfer the shares of Private Limited Company

There are certain restrictions over the transfer of the shares of the Private Limited company the following procedure should be followed to transfer the shares:

  • At first, it is necessary to obtain the share transfer deed as required in the prescribed format
  • This deed needs to be duly signed by the transferor and the transferee.
  • Stamp this transfer of share transfer deed with his or her name, address, and signature.
  • The transfer document or the allocation letter is to be attached to the share certificate and sent to the company
  • The company should process the paperwork and the transferor should be granted a new certificate in case it is accepted.
  • The transferor will request the company to transfer his shares.
  • A notice will be sent by the company to all the existing members that the above-mentioned shareholder has shown the intention to transfer the shares.
  • In case no existing member has shown interest in the company then the company will intimate the transferor that he can sell his shares to a nonmember.

Then the transferor will transfer the shares by the following process:

Form SH-4: This is the most important instrument of transfer through which the process is initiated. The transferor will have to submit the SH4 that is duly executed, dated, and stamped to the company. The SH4 contains the following information:

  • Execution date
  • CIN of the company
  • Name of the Company
  • Class of the securities
  • Nominal value/ Amount called up/ Amount paid up of the securities.
  • The securities that are to be transferred at a consideration or Rs… Distinctive no. of shares, certificate no.
  • Name of the transferor along with his Folio No, Signature. Also the same should be witnessed.
  • Name of the transferee along with the details like Father’s name, address, Email id, occupation, Folio, and Signature.
  • The instrument of the transfer should be duly stamped as per the Indian Stamp Act. of 1899.
  • Once all the details are submitted then the same company will see if everything is in place and will register the same. A share certificate is issued and endorsed to the transferee within one month of the receipt of the Instrument of Transfer.

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