Share Transfer
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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.
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Introduction
Share Transfer
An important characteristic of a company is that its shares are transferable. Shares or debentures are movable property. They are transferable in the manner provided by the articles of the company, especially, the shares of any member of a public company.
The transfer of securities is possible through any contract or arrangement between two or more persons. The provisions of the Companies Act deals with the transfer and transmission of securities. Transmission of securities means loss of title on these securities due to death, succession, inheritance, bankruptcy etc. In short, it is something other than transfer.
Transfer of shares means the voluntary handing over of the rights and possibly, the duties of a company member (as represented in a share of the company). The rights and duties of the share transfer happen from a shareholder who wishes to not be a member of the company any more to a person who wishes of becoming a member.
Thus, shares in a company are transferable like any other movable property in the absence of any expressed restrictions under the articles of the company.
Benefits
Benefits of Share Transfer
Liquidity
Transferring shares allows an individual to convert their ownership in a company into cash. This can be useful for those who need to access funds quickly or want to diversify their investments
Diversification
By transferring shares, an individual can diversify their portfolio and reduce risk. This is especially important for those with a large percentage of their wealth tied up in one company
Tax Benefits
Depending on the circumstances of the transfer, there may be tax benefits for both the seller and the buyer
Conversion or Closure
Transferring shares can also help to improve corporate governance by bringing in new shareholders with different perspectives and expertise.
Estate Planning
Transferring shares can effectively pass on wealth to future generations or to a charitable organization
Process
Share Transfer In Easy Steps
Document Checklist
Documents required to Register a Trademark
Notice
Notice sent by the Transferor to the company
Board Resolution
Board Resolution passed for considering the Notice sent by the Transferor to Company
Letter of Offer
Letter of Offer given by the Company to its Existing Shareholders
Dissent Letter
Dissent Letter from the Existing Shareholder
Share Transfer
Share Transfer Deed in MCA Form SH 4 together with the stamp Duty paid
Certificates
Share Certificates
Board Resolution
Board Resolution passed for registering Transfer of Shares
Faq
Frequently Asked Questions (FAQ)
The penalty for a company a minimum default of Rs.25,000 and a maximum of Rs.5,00,000.
If the transfer occurs in physical form, the transferor must pay 0.015% towards stamp duty. However, if an electronic transfer of shares is carried out, the transferee has to be 0.015% on a delivery basis and 0.003% on a non-delivery basis.
The transfers settled without the involvement of a clearing house of the exchange, or a clearing corporation is off-market transfers of shares. These transfers can be made from or to sub-brokers or delivered for trade-to-trade transactions.
First, the investor has to fill out a Delivery Instruction Slip or DIS to their current broker. Their broker, in turn, forwards the DIS request to the depository. Finally, the repository transfers the shares to the new Demat according to the instruction.
It is optional for an investor to execute a gift deed for gifting shares to their loved ones. However, As shares are movable properties, executing a gift deed will help the investor have a legal record proving the transfer.
