Share Transfer in Private Companies

Share transfer in a private company involves the transfer of ownership of shares from one person to another, which requires the execution of a share transfer deed (SH-4) and approval from the company's board of directors. The process also attracts a stamp duty of 0.015% of the share transfer value, though this figure may vary and it's essential to verify the current figure. The Articles of Association (AoA) of the company may also impose certain restrictions on share transfers.

What is the Procedure for Share Transfer?

The procedure for share transfer in a private company involves several steps, including obtaining board approval, executing the share transfer deed, and paying the applicable stamp duty. The following are the key steps involved:

1. Obtain board approval: The board of directors must approve the share transfer by passing a resolution.
2. Execute the share transfer deed (SH-4): The transferor and transferee must execute the SH-4 deed, which must be stamped and signed by both parties.
3. Pay stamp duty: The applicable stamp duty must be paid on the share transfer deed.
4. File Form SH-4: The company must file Form SH-4 with the Registrar of Companies (RoC) within 60 days of the share transfer.

What are the Restrictions on Share Transfer?

The AoA of a private company may impose certain restrictions on share transfers, such as the requirement for board approval or the right of first refusal. The following are some common restrictions:

• Board approval: The board of directors may be required to approve the share transfer.
• Right of first refusal: The company or other shareholders may have the right of first refusal to purchase the shares being transferred.
• Lock-in period: The shares may be subject to a lock-in period, during which they cannot be transferred.

Document	Purpose	Timeline
SH-4	Share transfer deed	Executed at the time of share transfer
Form SH-4	Filing with RoC	Within 60 days of share transfer
Board resolution	Approval of share transfer	Before executing SH-4

The share transfer process in a private company involves several steps and requires compliance with the company's AoA and applicable laws, including the payment of stamp duty and filing of Form SH-4 with the RoC.

Frequently Asked Questions

What is the stamp duty payable on share transfer?

The stamp duty payable on share transfer is 0.015% of the share transfer value, though this figure may vary and it's essential to verify the current figure.

Can a private company restrict share transfers?

Yes, a private company can restrict share transfers through its AoA, which may include requirements such as board approval or the right of first refusal.

What is the timeline for filing Form SH-4?

Form SH-4 must be filed with the RoC within 60 days of the share transfer.

The bottom line

Share transfer in a private company involves several steps, including obtaining board approval, executing the share transfer deed, and paying the applicable stamp duty. It's essential to comply with the company's AoA and applicable laws to ensure a smooth and valid share transfer process.