Shares transfer in a private company. Shares determine the ownership of a company. According to law, shares in a private company cannot be transferred easily. Rules pertaining to transfer of shares must be mentioned in the ARTICLES OF ASSOCIATION. However, if a shareholder wants to sell his shares, he has to offer the shares to the existing members of the company, the price for which would be determined by the directors of the company. If no shareholder is interested in buying the shares, only then can they be sold outside. The articles contain restrictions on the transferability of shares.
What is the process to transfer shares?
- Check the articles of association for any restrictions
- Solve the restrictions, if any
- Shareholder to give in writing to the director that he wants to transfer his shares
- Determine the price of the shares to be sold (to be decided by the director)
- Company sends a notice to all shareholders proposing to buy the shares on sale
- If an existing shareholder does not buy the shares, an outsider can be approached to buy them.
How to put the transfer into effect?
- A proper transfer deed in form SH.4 need to be duly stamped and executed by the transferor and transferee. Name, address and occupation must be specified along with the certificate of shares or letter of allotment of shares.
- Transferor and transferee have to intimate to the company the reason of transfer of shares
- The Form SH.4 to be delivered to the company within 60 days of its execution
- Stamp duty of Rs. 0.25 for every share of value Rs. 100 to be paid
- Within one month, the company should get a certificate of all shares transferred after application for registration of transfer of shares
- Hold board meeting to pass resolution to approve the transfer of shares
- If the board accepts the transfer, it shall register the transfer and issue share certificate within one month. If the board rejects the transfer, it will send a notice to the transferor/transferee within 30 days of receiving Form SH.4 from transferor/transferee, stating reasons for refusal
- Share transfer details to be given to ROC in annual return in Form MGT-7
Time taken for the whole process is tentatively 2-3 weeks.
Cost of vendor ranges from RS. 6000-10000.