Transfer of Shares means one person gives their shares to another. In a private company, you sign Form SH-4, pay stamp duty, get board approval & the company updates its register.
Say you want to sell your shares in a family-run private company, or gift them to your son. Transfer of Shares is the process that makes that change legal.
The catch is that every private company has its own rules. Your Articles may require board consent or a first offer to other members, and skipping this can get your request refused.
Below, you will see the steps in order, the documents to keep ready, the stamp duty, and what to do if your shares are sitting with the IEPF.
What Is Transfer Of Shares in a Private Company?
In short, it is the legal change of share ownership from a seller to a buyer. The company records the change, and the buyer becomes the new member.
Under Section 44 of the Companies Act, 2013, shares are movable property. They can be passed on freely, unless the company’s Articles of Association set limits. Most private companies do set such limits.
Do not confuse this with transmission. Transfer of Shares happens by choice, through sale or gift. Transmission happens by law, such as on death & often needs a succession certificate or probate.
What Are the Benefits of Transfer Of Shares?
Share transfer allows owners to leave the business, bring in partners, or plan for family succession. These are the advantages for both the person selling the shares and the person buying them.
- Easy exit: the person selling the shares can get money without having to shut down the business.
- Partners: the person buying the shares can add new skills or money to the business.
- Succession: owners can give shares to family members in a way.
Each advantage works only if the rules in the Articles of Association and the Companies Act are followed. If a rule is missed, it can slow down the transfer. It can also lead to the board rejecting the deal.
Which laws are important for a share transfer in a company?
The rules that affect the transfer come from three places: the Companies Act, the Articles of Association and the stamp duty rules. In some cases, Demat rules and FEMA rules also apply.
| Rule | What It Says |
| Section 44 | Shares are movable property, transferable as per the Articles |
| Section 56 | Needs a signed deed; new certificates within one month |
| Section 58 | Company may refuse and must give notice within 30 days |
| Rule 9B | Non-small private companies must use demat form |
| Stamp duty | 0.015% on off-market deals |
| FEMA | Form FC-TRS within 60 days for non-resident deals |
How Does Transfer Of Shares Work? 6 Steps to Follow
The process has six steps for physical shares. Follow them in order & keep copies of every paper you sign or receive along the way.
1. Check the Articles of Association and Agreement
The process has six steps when dealing with shares. Go through them one after another. Make sure to save all the papers you sign or get during the process.
2. Sign Form SH-4 and Pay Stamp Duty
Both parties sign the transfer deed in Form SH-4. Stamp duty of 0.015% is paid on the deal value for physical shares, and the stamp is affixed to the deed.
3. Submit the Documents to the Company
The buyer sends the signed SH-4, the original share certificate, and ID proof to the company. This should happen within 60 days of signing the deed.
4. Get Board Approval
The board checks the papers and the Articles, then passes a resolution to approve the transfer. If it refuses, it must inform the seller within 30 days.
5. Update the Register of Members
After approval, the company enters the buyer’s name in the Register of Members. This entry is the official proof that the buyer now owns the shares.
6. Receive the New Share Certificate
The company cancels the old certificate and issues a new one in the buyer’s name. The law gives it one month after the deed is lodged to do this.
What Documents Are Needed for Transfer Of Shares?
Papers often differ a little for physical and demat deals. Keep these ready before you apply, as missing papers are a common cause of delay.
- Form SH-4, signed and stamped
- Original share certificate (physical shares)
- PAN and address proof of both parties
- Delivery Instruction Slip (demat shares)
Demat deals need no SH-4. The seller gives a delivery instruction to the depository participant, and the Transfer of Shares completes electronically in the buyer’s demat account.
What Happens to Shares Moved to IEPF?
If you do not claim dividends for seven years in a row, the company sends your shares to the IEPF Authority. You can still claim them back.
Shares transferred to IEPF can be claimed back by you or your legal heirs through Form IEPF-5. Share Claimers helps you check if shares have moved to IEPF and file the claim.
- File Form IEPF-5 online on the MCA portal
- Send the signed form and documents to the nodal officer
- Get the shares in your demat account after approval
Keep your ID proof, shareholding details, and bank details ready, as the process can take a few months, so check your claim status often & reply fast to queries.
Conclusion
Transfer Of Shares in a company is easy if you do things the right way. Look at the Articles, sign the document, pay the stamp duty, and get approval from the board. Make sure all papers are stored in one place to prevent delays and arguments.
At Share Claimers we provide Succession Certificate in Chennai, Probate services in Chennai, IEPF Claim in Chennai, Transmission of Shares, and IEPF 5 Filing Service, with support at every step.
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FAQ’s
Q1. What is a share transfer in simple words?
Transfer Of Shares means a seller hands over ownership to a buyer. The company records the change in its register.
Q2. Is board approval needed for a share transfer?
Usually yes. Most Articles require board consent, so check them before you sign, as this can delay the Transfer of Shares if skipped.
Q3. What is the stamp duty on shares?
Off-market deals carry stamp duty of 0.015% of the deal value. Pay it before you submit the deed to the company.
Q4. How long does a share transfer take?
Transfer Of Shares usually finishes within one month of the company getting the deed. Board approval timing can add a few days.
Q5. Can a company refuse to register a transfer?
A private company can refuse as per its Articles. It must send notice of refusal within 30 days, and you may appeal to the NCLT.
Q6. What is the difference between transfer and transmission?
Transfer Of Shares is a choice, like a sale or gift. Transmission of shares happens by law, for example, on the holder’s death.
Q7. Can I sell shares to a non-resident?
Yes, but FEMA rules apply. File Form FC-TRS within 60 days, or the Transfer Of Shares may not be valid.
Q8. Can unclaimed shares be claimed back from IEPF?
Yes. Shares transferred to IEPF can be claimed by the owner or legal heirs by filing Form IEPF-5 online and sending documents to the company.
Q9. Is demat mandatory for private companies?
Non-small private companies must hold and transfer shares in demat form under Rule 9B. Small companies can still use Form SH-4.
Q10. How can I contact Share Claimers for help?
Visit shareclaimers.com/transfer-of-share/ and fill in the contact form. The team will call you back to guide the next steps.