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Basic Facts on Share Transfer
What is a Share Transfer?
Who is involved in Share transfer?
Subscribers to the memorandum
The legal representative in the case of a deceased
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.
- The transferor and the transferee must duly sign this deed.
- Stamp this transfer of share transfer deed with their name, address, and signature.
- The transfer document or the allocation letter will 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 if accepted.
- The transferor will request the company to transfer his shares.
- The Company will notify all the existing members that the shareholder mentioned above has shown the intention to transfer the shares.
- If no existing member has shown interest in the company, the company will inform the transferor that he can sell his shares to a nonmember.
This is the most important instrument of transfer through which the process is initiated. The transferor must 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 to be transferred at a consideration or ₹___ 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 and 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, the same company will see if everything is in place and register the same. A share certificate is issued and endorsed to the transferee within one month of receiving the Instrument of Transfer.
Transfer of share by Physical mode
At times, the companies send an acknowledgement of the instrument to the transferor who has lodged a transfer with the Company before scrutinising the documents. This notice comes in the form of a letter with a checklist for scrutinising the transfer documents.
Some companies also issue transfer receipts. In case the transferor and payment make the transfer application for the shares of the Company is partly made. The Company should not have any objection to transferring the shares within 2 weeks from the receipt of the issued notice.
The Company is not statutorily obliged to notify the transferor when the transferee lodges the transfer of the documents.
Any share transfers us complete with the registration of the share transfer. A share transfer form is a document through which the transferee agrees to accept the shares. This becomes a legal contract with the Company.
Once the Company approves and also registers the transferee’s name that is entered in the registry, it qualifies him as a member of the Company. Maintenance of the register of the transfer is not a statutory requirement.
Delivery of Share Certificate
Businesses with a share capital
The Company should not (within 60 days of the execution) register any shares or ownership interest transfer to any beneficial owners with proper instruments.
Application by the transferor
The transfer should only be registered once the Company has notified the transferor within 2 weeks of the notice of the receipt.
No opposition certificate
In the following events, the following timelines should be followed
For memorandum subscribers
Within 2 months from the date of incorporation.
Allocating all the shares of the Company
Within 2 months from the allocation date.
Debenture allocation within 6 months of the allocation date.
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