Procedures involved in Share Transfers, Time Limits, and Penalty for non-compliance
- A company's essential aspect is that its shares are transferable.
- Legally speaking, a company's shares or debentures are considered movable property.
- They are transferable in accordance with the terms of the company's articles, most prominently the shares held by any member of a public company.
- Securities can be transferred by a contract or a special agreement between two or more parties.
- The Companies Act addresses the laws regulating the transfer and transmission of securities/shares extensively.
- The loss of title to securities as a consequence of death, ascension, inheritance, insolvency, or other similar occurrences is referred to as "transfer of securities."
- It is essentially the transfer of a member's rights and obligations to another individual who desires to be a member of the company.
What does the share transfer mean?
- The consensual/voluntary transfer of a company member's rights and possibly obligations is referred to as a share transfer.
- The rights and obligations of a share transfer are transferred from a shareholder who desires to no longer be a member of the company to an individual who wants to become a member.
- Thus, in the absence of any stated restrictions under the company's articles, shares of a company are transferable similar to any other moveable property.
Individuals that are involved in the transfer or transmission of share
- Subscribers of the memorandum
- In the event of a death, a legal representative is appointed
- Company Members (listed or unlisted)
Under the Companies Act of 2013, there is a proper procedure for transferring or transmission of shares
- To begin, the transfer deed must be obtained in the specified form, Form SH-4, and must be approved by the specified authorities.
- In the following circumstances, the transfer deed or instrument of transfer may not be in the specified form (Form SH-4):
- In a situation where the company's director or nominee transfers shares on representing another corporate body pursuant to section 187 of the Companies Act, 2013.
- When a company's director or a nominee transfers shares on the behalf of a government-owned or controlled corporation;
- In the situation where the shares are transferred as collateral/security and if it pertains to any of the below-mentioned banks or institutions.
- State Bank of India; or
- Any other banking company; or
- Any scheduled bank; or
- Financial Institution; or
- Central Government; or
- Any corporation owned by the Central or State Government; or
- Trustees who have filed the declarations.
Kindly Note: A uniform/standard format can be utilised to transfer debentures.
- Substantiate the articles of association for shares, the trust deed for debentures, and the transfer deed pursuant to the Companies Act, 2013.
- A stamp is mandatory on the transfer deed in accordance with the Indian Stamp Act and the state notification on stamp duty.
- A person who authorises/ approves a transfer by signing his signature and other credentials must see the transferor and transferee sign the share/debentures transfer deed personally.
- The necessary share/debenture allocation certificate letter must be duly attached and delivered to the company together with the transfer deed.
- If the transferor's application is for partially paid shares, the company is obliged to duly inform the transferee of the outstanding amount on the shares/debentures.
- Additionally, the transferee is obliged to provide a letter of no objection within two weeks post receiving the stated notification.
- If the signed transfer deed is misplaced, attach the same value stamp to a formal written application. In these circumstances, the board is obliged to recognize the transfer that is also subject to various indemnity provisions as it deems relevant.
- If the company's shares are formally listed on a registered stock market, the company is not permitted to deduct/charge a registration fee share and debenture transactions.
In the following two instances, a company is not needed to register the partial transfer of shares:
- The company has served the transferee with a notice in Form No. SH.5.
- Until the transferee provides a letter of no objection to the transfer in two weeks of receiving the company's notice.
- A company with a share capital: It is obligatory that a company must not register the company's securities transfer or the members' interest, excluding the beneficial owners, without a duly completed instrument of transfer in 60 days post-execution.
- The transfer will not be registered until and unless the company notifies the transferor of the application and the transferee produces a certificate of no objection within two weeks of receipt of the notice.
- The company shall furnish certificates for all securities issued, transferred, or transmitted in the following circumstances and within the time periods specified below:-
- In the event of memorandum subscribers- within two months of the date of formation.
- In the event of an allotment of any of its shares- within two months from the date of the allotment.
- In case the company receives the instrument of transfer- In 1 month post the date of receiving.
- Debenture's allotment – Within 6 months after the date of allocation.
Penalty for non-compliance
- In the case of a company – Minimum Rs. 25,000 - Maximum is Rs. 5,00,000.
- In case an officer does a default– Minimum is Rs. 10,000 - Maximum is Rs. 1,00,000.
Get the best service for the transfer of shares
- We, at Careful Counting, provide service for the transfer of the company’s shares.
- We have a profound experience of more than a decade in the field of corporate compliance.
- Provide us with some basic documents and we will get started right away.
Basic Documents Required
- Numbers of shares held
- The amount of share held
- Bank Statement confirming the share transfer consideration paid.
- Form SH-4 duly signed by transferor and transferee
- Company's Name
- Registered Address
- Corporate Identity Number
- Transferor and transferee Aadhar card and PAN Card copy