A transfer of shares is an important business transaction, especially for shareholders who wish to buy or sell shares in a company. Whether you’re transferring shares for personal or investment reasons, understanding the protocol ensures that the process goes smoothly, legally, and transparently. The main procedures involved in transferring shares will be explained in this blog.

Essential Steps Involved in the Transfer of Shares

Transferring shares involves numerous critical processes to guarantee that everything is done correctly. Each step helps to guarantee that the transfer is legal and valid. In this section, we’ll go over the easy procedures you need to take for a perfect transfer of shares.

1. Check the Company’s Articles of Association (AOA)

Before the Transfer of Shares, review the company’s Articles of Association (AOA). The AOA establishes the norms and conditions under which share transfers may occur. Many companies impose restrictions such as:

• Preemptive rights: Existing shareholders may have the first right to purchase the shares.

• Board approval: Before the Transfer of Shares may take place, the company’s board of directors may need to give its approval.

Knowing these constraints will help you understand the process before you begin transferring shares.

2. Prepare the Share Transfer Deed/Form

After reviewing the company’s AOA, the next stage in the share transfer process is to complete a share transfer agreement. The legal document should include the following information:

• The name of the transferor (the individual transferring the shares).
• Name of the transferee (person who receives the shares).
• Number of shares being transferred.
• The unique ID in the company’s registry is the folio number.

To finalize the share transfer, both the transferor and the transferee must sign this document.

3. Stamp the Transfer Form

To ensure compliance with legal requirements, the share transfer document must be stamped after completion. The value of the shares being transferred determines the stamp duty. When stamped, the transfer deed is regarded as valid for the transfer of shares.

• The amount of stamp duty varies by jurisdiction. Therefore, it is critical to pay the appropriate cost.

4. Submit the Transfer Form to the Company

After stamping the form, send the share transfer deed to the company’s Registrar of Share Transfers. You have to turn in the deed as well as:

• The transferor holds the original share certificate.
• Proof of payment for stamp duty.

The company’s registrar will verify that all details are correct before proceeding with the transfer of shares.

Read Also- How to Check if Your Shares Transferred to IEPF?

5. Board Meeting and Approval

The board of directors of the company will review the share transfer after the transfer form is received. If the company’s articles of association do not restrict who can purchase shares, the board must authorize the transfer.

• The board will pass a resolution authorizing the transfer of shares if the transfer is approved.

6. Issuance of New Share Certificate

A new share certificate will be issued to the transferee by the company following the board’s approval of the share transfer. The previous certificate of the transferor expires, and the new certificate becomes the official document attesting to the transferee’s ownership.

• The transfer of shares will also be reflected in the company’s updated member registration.

7. Updating the Register of Members

Updating the company’s member registration is the last phase in the share transfer procedure. All of the company’s shareholders are officially included in this registry. When the transfer is finished, the new shareholder’s name will be entered into the register, completing the share transfer.

Wrap Up

To transfer shares, a number of important steps need to be taken, such as reviewing the articles of association of the firm, submitting the transfer deed, and obtaining board approval. Both the transferor and the transferee can ensure a legitimate and legally binding transfer by following the proper procedure.

Our area of expertise at Share Claimers is helping people and companies with the share transfer procedure. Our staff makes sure that all required procedures are followed and that the transfer goes off without any issues.

Are you prepared to start transferring shares? To ensure a smooth and law-abiding share transfer process, get in touch with Share Claimers right now!

FAQs

Q.1 What is the process for transferring shares?

Ans. The transfer includes completing a transfer form, sending it to the business, and making sure all rules are followed, including getting both the buyer’s and seller’s signatures.

Q.2 How can shares be moved from one demat account to another?

Ans. Transfer shares by submitting a Delivery Instruction Slip (DIS) and the recipient’s Demat information to the DP (Depository Participant) in order to start an off-market transfer request.

Q.3 Who will pay stamp duty on a share transfer?

Ans. Depending on the Indian state, the buyer is usually in charge of paying the stamp duty on share transfers.

Q.4 What is the time required to transfer shares to another person?

Ans. Depending on the procedure and verification needs, a Demat transfer typically takes two to three days, while a physical share transfer takes seven to fifteen days.

Q.5 How do you legally transfer shares?

Ans. By signing a transfer deed or utilizing a Demat account transfer procedure, shares can be lawfully transferred while adhering to company regulations, securities laws, and stamp duty obligations.

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