Transfer of Shares

Transfer of Shares: A Detailed Guide

A share transfer moves ownership of existing shares from a transferor to a transferee under Section 56 of the Companies Act, 2013, leaving the company’s total paid-up capital unchanged. The transfer is made on a duly stamped Form SH-4, the instrument of transfer, signed by both parties and delivered to the company within 60 days of execution, with stamp duty at 0.015% of the consideration or value. The board approves the transfer, the old share certificate is cancelled and a new one issued within a month, and the register of members is updated. A private company’s articles often restrict transfers through a right of first refusal, so the shares may need to be offered to existing members first. Where a non-resident is involved, FC-TRS under FEMA also applies.

Why Transfer Shares

A share transfer serves several purposes:

• Changes Ownership: It moves shares to a new owner cleanly and legally.
• Brings in Investors: It lets a new investor buy into the company.
• Enables Exit: It allows an existing shareholder to exit.
• Succession: It supports gifting or passing shares within a family.
• No Capital Change: It changes ownership without altering total capital.
• Clear Records: It keeps the shareholding records accurate.

Key Requirements

A valid transfer requires:

• Form SH-4: The transfer is made on a stamped Form SH-4.
• Stamp Duty: Duty at 0.015% of consideration is paid.
• 60-Day Lodging: SH-4 is delivered to the company within 60 days.
• Board Approval: The board approves and registers the transfer.
• Articles Checked: Any transfer restriction in the articles is followed.
• Certificate Issued: A new share certificate is issued within a month.

The Transfer Steps

A share transfer involves:

• SH-4 Execution: Both parties sign the stamped transfer deed.
• Offer to Members: Where the articles require, shares are first offered to members.
• Lodging: The SH-4 and certificate are lodged with the company.
• Board Resolution: The board approves the transfer.
• Register Updated: The register of members is updated within 7 days.
• New Certificate: A fresh certificate is issued to the transferee.

When a Transfer Applies

A share transfer is used:

• When a shareholder sells their shares to another person.
• When shares are gifted within a family or otherwise.
• When an investor buys into an existing company.
• When a shareholder exits and transfers their stake.
• When shares move on the basis allowed by the articles.

The Process

A transfer begins with the transferor and transferee executing a Form SH-4, paying stamp duty at 0.015% of the consideration or value. Where the articles require, the shares are first offered to existing members under the right of first refusal. The stamped SH-4, together with the share certificate, is lodged with the company within 60 days. The board passes a resolution approving the transfer, the company cancels the old certificate and updates the register of members within seven days, and issues a new certificate (Form SH-1) to the transferee within one month. The transfer itself needs no ROC form, but it is reflected in the company’s annual return; for a non-resident party, FC-TRS is filed under FEMA.

Documents Required

For the Transfer:

• The executed and stamped Form SH-4, and the original share certificate.
• The PAN and identity proof of the transferee.

Supporting:

• The board resolution approving the transfer, and any right-of-first-refusal waiver from existing members.
• The share-purchase agreement where there is one.

Share Transfer Process

A share transfer follows a clear sequence:

1. Check the articles for any transfer restriction.
2. Offer the shares to existing members, where required.
3. Execute Form SH-4 and pay the stamp duty.
4. Lodge the SH-4 and certificate with the company within 60 days.
5. Pass a board resolution approving the transfer.
6. Update the register of members within 7 days.
7. Issue a new share certificate to the transferee.

Transfer Shares with Samkhya

Transferring shares with Samkhya Corporate Services is simple. Just follow these easy steps:

• Tell us about the transfer: Share the parties and the shares involved.
• We prepare SH-4: We draft the deed and compute the stamp duty.
• Fill the form: Complete our online form and provide the documents.

From there, our team handles the deed, stamp duty, board approval, and records.

After the Transfer

Once a transfer is registered:

• Register Updated: The register of members shows the new holder.
• Certificate Issued: The transferee holds a new share certificate.
• Annual Return: The transfer reflects in the next annual return.
• FEMA if Foreign: FC-TRS is filed where a non-resident is involved.
• Records Aligned: The company’s records reflect the new shareholding.
• Rights Pass: The transferee gains the rights attached to the shares.

Stamp Duty and Demat

The main cost of a share transfer is stamp duty at 0.015% of the consideration or value, payable by the transferor, with no ROC filing fee for the SH-4 itself. A practical point is the demat shift: under Rule 9B, non-small private companies are required to hold and transfer their shares only in dematerialised (demat) form, with the deadline extended to 30 June 2026, once it applies, transfers go through the depository (NSDL/CDSL) rather than a physical SH-4, and the 0.015% duty is collected automatically. Two other points: a private company’s articles may restrict who shares can be transferred to, and a transfer involving a non-resident must be reported in FC-TRS under FEMA within 60 days. A clean transfer keeps the stamp duty paid and the register updated promptly.

Share Transfer at a Glance