🔷 SHARE TRANSFER PROCEDURE IN A COMPANY

(Sections 56, 58 & 59 of Companies Act, 2013 + Rule 11 of Companies (Share Capital & Debentures) Rules, 2014)

🔹 TYPES OF SHARE TRANSFER

1️⃣ Transfer between existing shareholders

2️⃣ Transfer to outsider (Private Company) – subject to AOA restrictions

3️⃣ Gift transfer

4️⃣ Transmission (death / insolvency) – separate process

👉 This note covers normal voluntary share transfer.

🔹 PRE-CONDITIONS (VERY IMPORTANT)

✔ Shares must be fully paid-up

✔ Transfer must comply with Articles of Association

✔ Proper stamp duty paid

✔ SH-4 duly executed

✔ Board approval required

🧭 STEP-BY-STEP SHARE TRANSFER PROCESS

🔹 STEP 1: CHECK AOA (PRIVATE COMPANY)

Right of pre-emption

Restriction on outsider transfer

Board discretion

📌 If required → obtain No Objection / Offer Letter from existing members.

🔹 STEP 2: EXECUTION OF SHARE TRANSFER DEED (FORM SH-4)

📌 STAMP DUTY

0.25% of consideration

Paid by franking / e-stamp / adhesive stamp

Stamp must be before or at execution

📄 IMPORTANT POINTS FOR SH-4

✔ Signed by Transferor & Transferee

✔ Witness signature mandatory

✔ Date & consideration mentioned

✔ Share certificate attached

🔹 STEP 3: SUBMISSION TO COMPANY

Documents submitted by transferee:

SH-4 (original)

Original share certificate

PAN & address proof

Board approval request letter

⏱ Within 60 days of execution of SH-4

🔹 STEP 4: BOARD MEETING – APPROVAL

📄 NOTICE OF BOARD MEETING

Writing

NOTICE OF BOARD MEETING

Notice is hereby given that a meeting of the Board of Directors of __________________ Private Limited will be held on __________ at __________ to consider and approve transfer of shares.

Director

📄 BOARD RESOLUTION – SHARE TRANSFER APPROVAL

Writing

BOARD RESOLUTION

RESOLVED THAT the transfer of ______ equity shares of ₹___ each from Mr./Ms. __________________ (Transferor) to Mr./Ms. __________________ (Transferee) as per Share Transfer Deed (Form SH-4) be and is hereby approved.

RESOLVED FURTHER THAT the name of the transferee be entered in the Register of Members and the name of the transferor be removed to the extent of shares transferred.

RESOLVED FURTHER THAT new share certificate(s) be issued to the transferee and old certificate(s) be cancelled.

RESOLVED FURTHER THAT Mr. __________, Director be authorized to do all acts necessary to give effect to this resolution.

🔹 STEP 5: ENTRY IN STATUTORY REGISTERS

✔ Register of Members (Form MGT-1)

✔ Register of Share Transfers

✔ Share certificate counterfoil

🔹 STEP 6: ISSUE NEW SHARE CERTIFICATE

Within 1 month of transfer approval

Cancel old share certificate

Affix company seal (if any)

📕 DRAFT – SHARE TRANSFER REQUEST LETTER

Writing

To

The Board of Directors

__________________ Private Limited

Subject: Request for Transfer of Shares

We hereby submit Share Transfer Deed (Form SH-4) along with original share certificate for transfer of ______ equity shares from Mr./Ms. __________________ to Mr./Ms. __________________.

Kindly approve the same.

Thanking You

Transferee

Date:

📕 DRAFT – REGISTER OF SHARE TRANSFER (FORMAT)

Date

Transferor

Transferee

No. of Shares

SH-4 Date

Board Approval Date

💰 STAMP DUTY CALCULATION EXAMPLE

Consideration: ₹10,00,000

Stamp Duty @ 0.25% = ₹2,500

📌 IMPORTANT TIME LIMITS

Particular

Time Limit

SH-4 execution

Anytime

Submission to company

60 days

Issue of share certificate

1 month

Board approval

Reasonable time

⚠️ COMMON MISTAKES (AVOID THESE)

❌ SH-4 unstamped or post-dated stamp

❌ Witness signature missing

❌ Share certificate not attached

❌ Transfer violating AOA

❌ Delay in issue of new certificate

💼 TAX ADVISORY (IMPORTANT)

🔹 For Transferor

✔ Capital Gains applicable

✔ Holding period decides LTCG / STCG

✔ Sale consideration taxable

🔹 For Transferee

✔ No tax on purchase

✔ Gift transfer → Section 56(2)(x) may apply