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The Transfer of Shares in a Private Limited Company is a systematic process that allows sharing ownership among different individuals. The term Shares indicates some ownership parts within a company, and it can be sold, purchased, or transferred.

The transfer of shares of a private limited company in India is governed by the Companies Act 2013, including the relevant rules and guidelines defined by the Ministry of Corporate Affairs.

Here is the list of important documents that are required for a successful completion of the process for the transfer of shares in a private company –

• Board Resolution: The Board of Directors of the company needs to advertise the share transfer through a formal resolution.
•  Indemnity Bond: The seller should be required to provide an indemnity bond to protect the company from future transfer-related losses.
•  No Objection Certificate: An NOC certificate from the seller may be asked to confirm their permission to the share transfer.
• PAN Card: A photocopy of the PAN card of the buyer is important for the transfer of the share process.
•  Share Certificate: The seller should present the original certificate of the share when submitting the share transfer agreement.
•  Share Transfer Deed: The share transfer deed should have signatures from both the seller and buyer of the shares that are important to facilitate the transfer.
•  Stamp Duty Payment: The share transfer deed also seeks the payment of stamp duty. This payment usually differs and varies by state.

The following persons are involved in the transfer of share process –

• Company (whether listed/ unlisted).
• Legal Representative, in case of a deceased.
•  Subscribers to the memorandum.
• Transferee.
• Transferor.

The process for the transfer of shares in a private company follows the Companies Act, 2013 and other relevant legal guidelines.

• The transfer deed is required to be obtained in the defined form, i.e. Form SH-4, advertised by the prescribed authority.

The instrument of transfer may not be in the defined form (Form SH-4) in the cases below –

1. When a nominee or director transfers shares in place of another body corporate under section 187 of the Companies Act, 2013.
2. When a nominee or director transfers shares in place of another body corporateunder section 187 of the Companies Act, 2013.

Such shares are transferred by way of deposit as security for repayment of any loan if made with any of the following:

1. Any corporation held by the Central or State Government
2. Any other banking company
3. Any scheduled bank
4. Central Government
5. Financial Institution
6.  State Bank of India
7. State Government
8. Trustees who have filed the declarations.

• A standard arrangement can be used as the instrument of transfer for transferring debentures.
• Obtain the Articles of Association where the shares are transferred, trust deed where the debentures are transferred and transfer deed registered either by or on behalf of the transferor and the transferee as per the provisions of the Companies Act, 2013.
• According to the Indian Stamp Act and stamp duty notification popular in the concerned state, the transfer deed should require stamps. The current rate of stamp duty for the transfer of shares is 25 paise for each hundred rupees of the value of the share or fraction thereof. That is to say, for shares worth Rs. 1,050, the stamp duty will be Rs. 2.75.
• Ensure the stamp placed on the transfer deed is cancelled when signing or at the time of signing the transfer deed.
• Such an individual who provides his name, address and signature as consent for transfer must witness the transferor and transferee sign the share/debentures transfer deed personally.
• The appropriate debenture/share certificate or allotment letter with the transfer deed should be duly attached and sent to the company.
• In case the application made by the transferee is for partially paid shares, the company has to properly announce the amount due on debentures/shares to the transferee. Also, an NOC is also required from the transferee within two weeks from the date of receipt of the
  announced notice.
• If the signed transfer agreement has been damaged, then attach the same value stamp on a written application. Here, the board may record the transfer on particular terms of indemnity as it sees fit.
• If the company’s shares are listed in a popular stock exchange, then the company is restricted from charging any fee for the registration of transfers of shares and debentures.

Note: A company shall not proceed with a transfer of partially paid shares in the following two cases.

• The company has issued a notice to the transferee in Form No. SH.5.
• Until such time that the transferee has provided an NOC for the transfer within two weeks from receipt of notice by the company.
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