What is the meaning of Share Transfer?
Transfer of share is restricted by the articles of association of a private limited company, which limit the right of a shareholder to transfer the company’s shares to an outsider. The shares of a company can be transferred from one person to another by executing a share transfer deed
Need for Transfer of Shares of the Company:
Transfer of shares refers to the transfer of ownership. Shares of a company are movable property and thus can be transferred like any other property. In other words, when an existing shareholder transfers the issued shares to the other person who is registered as the holder of those shares, the process can be termed as transfer of shares. A public company can freely transfer its shares, but there are some restrictions on the transfer of shares by a private company. The limits are imposed to protect the rights of investors and shareholders. A company shall register a transfer of securities of the company only when there is a proper instrument of transfer as per the format laid down in Form No SH. 4.
Steps Involved for Share Transfer:
STEP-1: Notice of Intention to transfer shares.
Written notice is submitted to the company by the seller defining his intention to transfer the shares, the existing members of the company are informed and invited to buy the shares
STEP-2: Documentation for Transfer of Shares
When the deal to transfer is finalised, and consideration of such transfer is fixed. Form No- SH.4 is filled up by the prospective buyers and the same is signed by transferor and transferee in presence of a witness. The transferor then hands over the share certificate and SH-4 to the transferee. Appropriate stamp duty on share transfer is to be paid by affixing share transfer stamps on the share transfer form.
STEP-3: Transferor send the Share Transfer Form and Certificate to Company
After the transfer is executed, witnessed and adequately stamped, the transferee sends a request for updating of the register of members with his details in replacement of the transferor details. The company records such transfers by convening the meeting of board of directors of the Company.
STEP-4: Make endorsement on the Share Certificate name of transferee.
After the due approval of the board of directors of the company, the share transfer is recorded in the register of transfer of shares and duly endorsement will be done on the share certificate with the name of the new member of the company.
Documents required for Share Transfer:
- Original Stamped Share Certificate which is to be transferred
- Share transfer form in SH-4 duly signed by the parties.
- ID and address proof of the transferor and transferee.
- Proof of payment of consideration of transfer if any.