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SHARE TRANSFER
One of the major advantages of companies is that they can transfer its shares. So, the transfer of shares means you(member of the company who doesn't wish to continue as a member) are voluntarily transferring the rights and duties of a member of a company to another person(who wishes to be a member of the company). This shows that shares of the company are movable property in the absence of any restrictions which are imposed in the article of company.
Peoples or entities that are involved in share transfers.
1) Subscribers to the memorandum.
2) Transferor.
3) Transferee.
4) Company (listed/ unlisted).
The process of transferring shares is as follows:-
You will need to obtain the transfer deed in Form SH-4 which is endorsed by prescribed authority.
The instrument of transfer is not necessarily mentioned in the prescribed form (Form SH-4) in the following cases:-
1) When any corporate shares are being transferred by a director or nominee under section 187 of the Companies Act, 2013;
2) Transfer share from a corporation owned or controlled by the central or state Government done by the director or nominee.
3) The shares that are transferred by means of deposit as a security for repayment of any loan/advance, if they are made with either of the following : SBI, any scheduled bank, any other banking company, Financial Institution, Central Government, State Government, any corporation that is held by Central or State Government, trustees who have filed the declarations.
4) A standard format can be used as the instrument of transfer for transferring debentures.
Then you would have to obtain Articles of Association in case of shares and also the transfer deed which is registered either by the transferor or the transferee.
Moreover, the transfer deed should contain stamps. The current stamp duty rate for transfer of share is 25 paise for Rs. 100/- of the value of the share or part thereof.
You need to make sure that the stamp affixed to the transfer deed is cancelled before signing the transfer deed.
The allotment letter along with the transfer deed must be attached and sent to the company.
If the transferor applies for partly paid shares, then the company should notify the amount due on shares. Also, a NOC from the transferee is required
Moreover, if shares of the company are listed in a recognized stock exchange, then there would be no charges for registration of transferring of shares.
Advantages
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For a purchaser, the cost of assets is valued at market value at the time of purchase i.e. for a vendor, tax losses can be used to eliminate any tax liability on the sale.
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The purchaser specifies the assets to purchase and the liabilities (if any) it is prepared to take over.
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The purchaser acquires ownership of all of the company’s assets and liabilities.
Disadvantages
Unforeseen liabilities are often assumed, such as tax and contingent liabilities. The vendor may not even know about these liabilities. These can include leaky building issues and lease issues such as reinstatement of premises on exit.
Minority shareholder approval - complications arise if they refuse to sell.
FAQs Section
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For 3 different transferees, you would have to submit 3 different applications.
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No, you will have to submit share transfer documents for stamping over the counter at the Stamp Office.
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Since there is only one transferee, you may submit only 1 application.
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When a company buys its outstanding shares to reduce the shares available in the open market is known as a share repurchase.
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The transfer deed should contain stamps. The present stamp duty rate for transfer of share is 25 paise for Rs. 100/- of the value of the share or part thereof.
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