Introduction
The share transfer is a process through which the transferring of share takes place between the existing person or from existing person to the third person. Transferability of shares are govern under companies article. The securities like equity share are generally freely transferable. The company’s act 2013 provides the process for the transfer of shares by both public and private companies; this can be executed with the help of form SH-4.
There is a certain restriction imposed on the transfer of shares of private limited companies as provided in their article. section44 of companies act 2013 states that share, debentures, or other interest of a member of a company are movable property and hence are transferable in the manner as provided in the company’s article of association.
Section 56 of the Companies Act, 2013 states that the transfer of shares of the company and other securities will be registered by a company only when a proper instrument of transfer of shares (share transfer form) is filed as prescribed in Form No. SH 4. The form SH 4 for transfer of share needs to be duly stamped, with adequate value, dated and executed by or on behalf of the transferor and the transferee.
Within 60 days from the date of execution of share transfer agreement along with share transfer certificate or certificate relating to securities SH-4 must be sent to the company by transferor or transferee. If in case there is no share transfer certificate, the application for transfer must be sent with the letter of allotment of securities. Partly paid-up shares shall not be registered by the company unless a notice in the form SH-5 has been issued to the buyer and has obtained NOC from the buyer within 2 weeks from the date of receipt of a notice.
Procedure
In case of private limited company securities can not be transferred directly to a non-member, for this following procedure should be followed:
âž² For transferring shares to non-member shareholder needs to send the request letter to the company for such transfer
âž² After receiving such a request letter company will call for Board meetings for taking the decision on such transfer and for sending a notice to all existing shareholders for purchasing such shares.
âž² If no other existing member is ready to purchase then the company shall send a letter to the transferor for transferring shares to non-member
âž² Then security holder who wishes to transfer his share can submit the share transfer deed duly executed.
âž² After receiving such deed along with share certificate company need to pass a Board resolution & register the entry for such transfer.
Documentation;
Documents required:
âž² Request letter by the transferor to company
âž² Board resolution considering the notice by the transferor to company
âž² Offer letter to existing shareholder
âž² Non-acceptance letter form existing shareholder
âž² SH-4
âž² Share certificate
âž² Board resolution for registering and approving such transfer