Transfer of Shares
Transfer of shares means the transfer of all the rights and duties of the shares from one person to another. Transfer of shares is affected by striking off the name of the existing shareholder from the register of members and by inserting the name of the transferee in place of the transferor in the register of members. Shares of a public company can be transferred freely however there are restrictions on the transfer of shares of a private company.
Procedure for transfer of shares?
- The first step to transfer a share is to execute a transfer deed in the Form SH-4.
- The transfer deed may not be required in the Form SH-4 in the following cases: –
a. In case a director of the company or nominee transfers shares on behalf of another body corporate under section 187 of the Companies Act, 2013.
b. In case a director of the company or nominee transfers shares on behalf of a corporation owned or controlled by the central or state Government.
c. In cases where Shares are transferred by way of deposit as a security for repayment of any loan or advance.
d. In case of transfer of debentures, a standard format can be used as the deed to transfer.
- Registration of transfer deed, Articles of Association(AOA) in case of shares, trust deed in the case of debentures is required either by the transferor and the transferee as per the provision of the Companies Act, 2013.
- A transfer deed is required to be stamped as per the Indian Stamp Act. The prevailing stamp duty rate for transfer of share is 25 paise per one hundred rupees of the value of the share or part thereof. That means for shares valued Rs.7000, the stamp duty will be Rs. 17.50.
- Before the signing of the transfer deed, the transferor and transferee shall check whether the stamp affixed on the transfer deed is canceled at the time of transfer or not.
- Share/debenture certificate or allotment letter including the transfer deed should be attached and sent to the company.
- If an application made by the transferor to transfer partly paid shares, the company shall notify the amount due on shares/debentures to the transferee. A company is not authorized to register any transfer of securities unless they are partly paid up, and the company has given a notice in Form No SH-5 to the transferee of security and he has not shown his dissent to such transfer within two weeks from the date of receipt of the notice.
- If the shares of the company are listed in a recognized stock exchange, then the company cannot charge any fee for the registration of transfers of shares and debentures.
