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Transfer of Shares of a Company

Shares of a company are movable property and thus can be transferred like any other property. A public company can freely transfer its shares, but there are some restrictions on the transfer of shares by a private company. The limits are imposed to protect the rights of investors and shareholders.

Preparation to Initiate Share Transfer

  1. Check for restrictions in the AOA
  2. First, offer shares to existing members
  3. Enter into a Share Transfer Agreement
  4. If they The transfer of Shares are restrict
  5. The share transfer form is SH-4 (Sec 56)

Documents Required For Transfer of Shares

Good documentation for the registration of a company plays a vital role & results in faster incorporation. Here is the list of the documents required from the directors and for the company’s registered address for the incorporation of the company. Please submit self-attested copies of documents that are clear and valid.

S.No A. Documents of Directors/Shareholder
1 Original Share Certificate of share to be transferred
2 Certificate of Stamp duty payment (Franking) on issue of share certificate
3 Valuation and the share transfer agreement
4 Share transfer form duly signed by the parties
5 ID and address proof of the transferor and transferee
6 Proof of payment of consideration of transfer if any

Transfer of Share Process

Step - 1: Notice of Intention to transfer shares

Notice of Intention to transfer shares

Written notice is submitted to the company by the seller defining his intention to transfer the shares, The existing members of the company are informed and invited to buy the shares

Step - 2: Documentation for Transfer of Shares

Documentation for Transfer of Shares

When the deal to transfer is finalised, and consideration of such transfer is fixed. Form No- SH.4 is filled up by the prospective buyers and the same is signed by transferor and transferee in presence of a witness. The transferor then hands over the share certificate and SH-4 to the transferee. Appropriate stamp duty on share transfer is to be paid by affixing share transfer tickets on the share transfer form.

Step - 3: Transferor send the Share Transfer Form and Certificate to Company

Transferor send the Share Transfer Form and Certificate to Company

After the transfer is executed, witnessed and adequately stamped, the transferee sends a request for updating of the register of members with his details in replacement of the transferor details. The company records such transfers.

Step - 4: Issue of fresh Share Certificate by the company

Issue of fresh Share Certificate by the company

After the due approval of the board of directors of the company, the share transfer is recorded in the register of transfer of shares and replacement share certificate is issued in the name of the new member of the company

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Step 1. Obtain Board of Directors Approval for change of object

To decide on the new object or amendment in the existing object clause of the company the directors must meet in a legally convened board meeting. The notice sent to directors must contain the agenda of the meeting, and we suggest to include the proposed resolution so that the directors come prepared. We strongly recommend following the standards prescribed by ICSI in SS-1 for board meetings.

Who can be a Sole Proprietor?

A sole proprietor is the absolute owner of a Sole Proprietorship Business. Any person who is above 18 years of age and who is otherwise capable of entering into a lawful contract is eligible to start a business as a proprietorship. The option to create a proprietorship is available to Indian Citizens only, and Foreign Citizens are strictly not allowed to set up or operate a proprietorship firm. However, an NRI and OCI are permitted to establish proprietorship firms subject to no repatriation of their profits.

How to Register a Sole Proprietorship Firm?

Ease of formation is the most significant feature of the sole proprietorship form of business. There is no prior registration required to start a proprietorship firm. Similarly, after starting the business, no law makes it mandatory to register the sole proprietorship. No agreement, deed, or documents are to be prepared for creating a proprietorship, and the firm’s registration is also not required.

Can I later convert my Proprietorship into a Company or LLP?

Yes, the proprietorship can be converted to LLP or Private Limited Company. However, the conversion process is complicated, and unless it is not necessary due to existing contracts or IPR, we do not advise going for the conversion.
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