Share Transfer

The procedure by which a shareholder of a company voluntarily transfers ownership rights and any related liabilities with a share of the company is referred to as a share transfer. This exchange takes place when a shareholder chooses to give up their ownership of the firm and transfers their share to someone else who wants to join. As a result, unless the company’s statutes of organisation impose explicit restrictions, shares of a corporation can be transferred in a manner similar to that of any moveable asset.

Individuals participating in the Share Transfer

• Beneficiaries of the memorandum.
• Legal Counsel, if someone has passed away.
• Transferor
• the receiver of a transfer.
• Business (listed or unlisted).

Guidelines for Share Transfers

Rules Regarding Transfers of Shares In accordance to the Companies Act of 2013

• First and foremost, the transfer deed must be acquired in Form SH-4, the specified form, and must be approved by the designated authority.
• In the following situations, the transfer instrument may not be in the required format (Form SH-4):
• In the event that a nominee or director transfers shares under section 187 of the Companies Act, 2013 on behalf of another body corporate;
• When a nominee or director transfers shares on behalf of a company that the federal or state governments hold or control;
• Deposited shares that serve as collateral for loan or advance repayment If any of the following are used in their creation:
• Central Government;
• State Bank of India;
• Any Scheduled Bank;
• Any other banking company;
• Financial Institution;
• State Government;
• any company owned by the central or state governments; or
• those who filed the declarations as trustees.
• Debenture transfers may be made using a standard format as the transfer instrument.
• In compliance with the terms of the Companies Act of 2013, get the trust deed for debentures, the transfer deed recorded by the transferor and the transferee, or on their behalf, and the articles of association for shares.
• The transfer deed shall require stamps in accordance with the Indian Stamp Act and the stamp duty notification in effect in the state in question. For the transfer of shares, the current stamp duty rate is 25 paisa for each 100 rupees of the share’s or portion of its worth. This implies that the stamp duty on shares priced at Rs. 1,050 will be Rs. 2.75.
• Verify that the stamp on the transfer deed is cancelled at the moment the document is signed, or before.
• The share/debentures transfer deed must be signed in person by the transferor and the transferee before a person may approve a transfer by providing their signature, name, and address.
• The transfer deed must be provided to the corporation with the appropriate share/debenture certificate or allocation letter attached.
• The corporation must appropriately advise the transferee of the amount owed on shares or debentures in the event that the transferor’s application is for partially paid shares. Additionally, the transferee must provide a no-object response within two weeks after receiving the aforementioned notice.
• In the event that the signed transfer deed is lost, place the equivalent value stamp on a written application. In this situation, the board has the authority to register the transfer on whatever indemnity terms it deems appropriate.
• In the event that the firm’s shares are traded on an authorized stock exchange, no registration fee may be assessed by the company for share and debenture transfers.

In these two situations, a firm is not required to record a transfer of partially paid shares:

1. The transferee has received a notification from the company in Form No. SH.5.
2. Until the transferee, within two (2) weeks after receiving the notice from the corporation, certifies that he has no objections to the transfer.

Limitations

• Within 60 days after the date of execution, the Company shall not record the transfer of any member’s interest in the Company or any securities owned by anyone other than the beneficial owners unless a valid instrument of transfer is used.
• Until the transferee provides a no objection certificate within two weeks of receiving notification from the corporation notifying the transferor of the application, the transfer will not be registered.
• In the following situations, the company must supply certificates of all securities assigned, transferred, or communicated within the specified time frames:
  1. For those who have signed the memorandum: – after the incorporation date and within two months after that.
  2. If any of its shares are allocated: within two months after the date of allocation.
  3. Receipt of the transfer document or transmission notification by the business: within a month after the date of delivery.
  4. Distribution of Debentures: within six months after the date of allocation.

Repercussions

• For companies, the prescribed range for the amount is from a minimum of Rs. 25,000 to a maximum of Rs. 500,000.
• For an officer in default, the stipulated range of penalty is from a minimum of Rs. 10,000 to a maximum of Rs. 100,000.