Share Transfer Services
Expert Assistance for Seamless Share Transfers in Private Companies
At Vetri Audit Services Private Limited, we specialize in providing end-to-end support for the lawful and compliant transfer of shares in private limited companies. Share transfer is a crucial aspect of corporate structuring and ownership changes, and we ensure that it is executed in line with all applicable legal provisions under the Companies Act, 2013.
What is Share Transfer?
Share Transfer refers to the voluntary transfer of ownership rights and obligations associated with shares of a company by one shareholder to another. This process is common when an existing shareholder wishes to exit the company or restructure ownership, and another individual (or entity) desires to acquire those rights and become a member.
While shares are movable property and are transferable like other assets, private limited companies impose restrictions through their Articles of Association (AOA) to safeguard internal control and ensure compliance.
Legal Framework Governing Share Transfer
Share transfers in India are primarily governed by:
- Section 56 of the Companies Act, 2013
- Rule 11 of the Companies (Share Capital and Debentures) Rules, 2014
- Form SH-4 - the prescribed Share Transfer Deed
These provisions ensure that share transfers are transparent, time-bound, and properly recorded.
Key Share Transfer Rules in Private Limited Companies
Private companies enjoy specific legal flexibility, subject to the following restrictions:
Pre-emptive Rights
- Existing shareholders have the first right of refusal to purchase shares offered for sale.
- Share valuation method is usually prescribed in the AOA.
- Only when existing shareholders refuse the offer, can the shares be transferred to an outsider.
Board's Discretion
- The Board of Directors has the authority to accept or reject any share transfer based on terms defined in the AOA.
Key Stakeholders in Share Transfer
The share transfer process involves multiple parties:
- Transferor: The current shareholder transferring the shares.
- Transferee: The person/entity receiving the shares.
- Company: Responsible for processing, approving, and updating records.
- Legal Representative: In case of transmission due to shareholder's death.
Step-by-Step Share Transfer Process
Here's a simplified breakdown of the legally compliant process:
Timelines at a Glance
| Action | Time Limit |
|---|---|
| Submit SH-4 & Certificate | Within 60 days of signing |
| Company Approval/Refusal | Within 30 days of receipt |
Special Provisions for Private Companies
- The transfer of shares is not automatic and may be denied based on valid AOA clauses.
- The company must comply with Section 2(68), which defines a private company and its restrictions.
About Form SH-4
Mandatory Fields:
- Company Name and Share Class
- Number of Shares and Consideration
- Transferor and Transferee Details
- Witness Signature
- Stamp Duty Details
Exceptions to SH-4 Requirement
- Dematerialized Shares: Transfer handled electronically via Depository Participants (DPs).
- Transmission of Shares: No SH-4 required in cases like death or insolvency.
- Gifts or Transfers without Consideration: Still require documentation and stamp duty.
Penalties for Non-Compliance
As per Section 56(6) of the Companies Act, 2013:
- Penalty for Company and Officers: Up to ₹50,000
- Continuous Default: ₹1,000/day of continuing offence
Why Choose Vetri Audit Services?
- Expert Legal Drafting of SH-4 and supporting resolutions
- Compliance with Stamp Duty and Board procedures
- Advisory on AOA clauses and valuation
- Timely filings and record updates
- Representation before ROC or authorities in case of disputes
Contact us today to manage your company's share transfers with complete confidence and legal assurance.
Contact us today for a consultation!
