The Share Transfer Process
A step-by-step guide to transferring shares in a private limited company.
The transferor and transferee must execute the Share Transfer Deed (Form SH-4), which is the primary legal instrument for the transfer.
The executed Form SH-4 must be duly stamped as per the Indian Stamp Act. The rate is 0.015% of the market value of the shares.
Submit the deed and original share certificate to the company. The Board of Directors will pass a resolution to approve the transfer.
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- Form SH-4 Drafting
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Important Considerations
Key factors to review before initiating a share transfer.
Articles of Association (AOA)
Always review the company's AOA first. It may contain restrictions on share transfers, such as the 'Right of Pre-emption,' which requires offering shares to existing members first.
Transfer vs. Transmission
A 'transfer' is a voluntary act by the shareholder. 'Transmission' is an automatic transfer by operation of law, such as upon the death or insolvency of a shareholder.
Share Transfer FAQs
Your common questions about transferring shares answered.
What is Form SH-4?
Form SH-4 is the prescribed legal document, or 'instrument of transfer,' that must be executed by both the seller (transferor) and buyer (transferee) to effect a share transfer.
How long does the company have to issue a new share certificate?
After the board approves the transfer, the company must issue a new share certificate in the name of the transferee within one month from the date of receiving the transfer documents.
Can the board refuse to register a transfer?
Yes, the board can refuse a transfer if the transfer documents are incomplete or if the transfer violates provisions in the Articles of Association. They must send a notice of refusal within 30 days.
Is share transfer possible for a one-person company (OPC)?
No, an OPC has only one member. Shares can only be transferred in the event of the member's death or incapacity, which is considered a transmission, not a transfer.