Company Share Transfer

Persons Involved In The Process Of Share Transfer

The parties involved in the process of share transfer are given below –

1 Transferor
2 Transferee
3 Subscribers to the memorandum
4 Company (Whether listed/unlisted)
5 Legal representative (In case of deceased)

Procedure For Share Transfer

The procedure for share transfer is as follows –

Transfer deed - Share transfer deed is an instrument used for transferring shares from one
person to another. There are two parties involved in a transfer deed – Transferor & transferee.
Transferor is a person who transfers his or her shares to another person whereas transferee is
a person to whom the shares are transferred. Transfer deed should be duly stamped &
delivered to the company along with share transfer certificate. SH-4 form is used to transfer
shares from one person to another.

Acknowledgement - Some companies sends a notice or acknowledgement of the
instrument to the transferor and some companies issue transfer receipt after transferring of
shares. Basically, a notice or acknowledgement is usually in the form of a letter containing
checklist of the transfer documents. The company will not register the transfer, if the transfer
application is partly paid by the transferor alone and there is no communication from the side
of transferee.

Document scrutiny - In the third stage, scrutiny of all the documents takes place. All
documents are scrutinized within 3 to 5 days from the date of receipt of the transfer of
documents. In case the documents are not acceptable, they are returned back to the transferee.
Documents are also returned in case the signature of the transferor on the transfer instrument differs from the signature on the company’s record.

Approval from the board - In the fourth step, if everything is correct and accepted after
scrutiny of documents, transfer of share will be approved by the board. If articles of
association empowers board to delegate its power in relation to approval of share transfer.
The power may be delegated to any other committee who might not be the company’s
directors.

Registration - Registration is very necessary to become a member of a company. A transfer is
incomplete without doing registration of share transfer. A share transfer form is filled by the
transferee and agrees to accept the shares. When a company approves the form and registers
the transfer, the transferee name is added to the registry of the members of the company.
Maintaining the register is not a mandatory requirement.

Delivery of share Certificate - When transfer becomes effective after the approval by the
company. The company hast to deliver the share certificate within 1 month from the date of
receipt. The share certificate must be endorsed with the respective name of the transferee.

Penalties For Any Default In Share Transfer

Minimum of Rs.25000 is to be charged from the company as a penalty for any default. The maximum
amount chargeable to penalize the company is Rs.500000. In case officer is penalized, minimum of Rs.10000 and maximum of Rs.100000 will be charged as penalty.