Shares Transfer procedure in a Private Company as per Companies Act, 2013

Generally, a private company is guided by its Article of Association. As per Section 2(68) of Companies Act 2013, Private Company restricts the transfer of its shares and prohibits invitation to public to subscribe to any securities of the Company.

  • Transfer of Shares: As per Section 56 of the Companies Act 2013, Company shall not register any transfer of securities, unless a proper instrument of transfer, duly stamped, dated and executed by or on behalf of Transferor and Transferee is sent to the Board within 60 days of the execution of the instrument of transferor, along with the Share certificate or Letter of allotment as the case maybe.

Practical Steps

  • Intimation: Transferor(s) and/or Transferee(s) need to intimate to the company of the intention to transfer shares.
  • Form: Transferor(s) and/or Transferee(s) need to execute the instrument of transfer as per Rule 11 of the Companies Act 2013 in “Form SH-4”. The same should be duly stamped as per Indian Stamp Act , 1899 with stamp duty (currently 0.25%) paid on market value or consideration amount, whichever is higher.

        Note:  Now the Presentation of instrument of transfer to prescribed authority (ROC) is not required.

  •  Share Certificate or Letter of Allotment: Share Certificate must be lodged with the company, or if no such share certificate exists then a letter of allotment must be lodged with the company along with the instrument of transfer.
  •  Board meeting and Resolution: The company shall duly hold a board meeting as per Section 173 for approving of the share transfer and pass appropriate resolution. The Company shall also be guided by its Articles as to the requirement of holding a Board Meeting.
  •  Intimation to transferee in case of partly paid shares: If only the Transferor has applied for the transfer of the shares which are partly paid then, the company will send notice to the transferee in Form SH-5, if transferee gives no objection within two weeks from the date of receipt of notice then Board shall proceed further.
  • Rejection or Acceptance: Where by virtue of Sec 58 of the Companiesm Act 2013 and AoA,  Board has the power to decline the transfer, the private company may refuse to register the transfer in this case and send notice to Transferor/ Transferee/ person giving intimation within 30 days from the date when instrument of transfer was delivered to the company, stating reasons for refusal. Further, if the company accepts and registers the transfer then it shall issue Share Certificate within one month from the date of receipt of instrument of transfer in the name of Transferee and shall made necessary changes in the Register of Members.
  • Notice to ROC: No such Notice or intimation is required to be given to ROC. The Share Transfer details shall be given to ROC in Annual Return of the company  in Form MGT-7.

posted by Priya Sharma.

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