Step 1: Obtain share transfer deed in the prescribed format. Step 2: Execute the share transfer deed duly signed by the Transferor and Transferee. Step 3: Stamp the share transfer deed as per the Indian Stamp Act and Stamp Duty Notification in force in the State.
Once a proper instrument of transfer (such as a stock transfer form) that has been executed and stamped has been delivered to the company whose shares are being transferred, the directors will either refuse or approve the registration of the transfer.
Directors can approve transfers if they are granted this power in the articles of association. Otherwise, transfers must be approved by the existing members. Both the transferor and transferee should be given a copy of the stock transfer form. A share certificate should also be issued to the new shareholder.
You may see it referred to as form J30 or a share transfer form, but it means the same thing. The person selling the shares (often called the ‘transferor’) should complete their details on the stock transfer form, including their name and address as well as identifying the shares to be transferred, and then sign it.
You can transfer shares for a private limited company between new and existing shareholders provided that the relevant notice is issued. To transfer shares for a company you will need to obtain and complete a Stock Transfer Form.
Shares or debentures are movable property. They are transferable in the manner provided by the articles of the company, especially, the shares of any member of a public company. The transfer of securities is possible through any contract or arrangement between two or more persons.
The model articles for private companies limited by shares provide a general power. They state that the directors may refuse to register the transfer of a share, and if they do, the instrument of transfer must be returned to the transferee with the notice of refusal.
(5) The directors may refuse to register the transfer of a share, and if they do so, the instrument of transfer must be returned to the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent.
The High Court said that the purpose of a power vested in the directors to refuse to register a transfer of shares was to protect the interests of a company’s shareholders as a whole. They should exercise that power honestly and in good faith, and not arbitrarily, capriciously, perversely, irrationally or unreasonably.
Meaning of Transfer of Shares
The shares of a public company are freely transferable unless the company has a valid reason to disallow the same. The shares of a private limited company are not transferable subject to certain exceptions. A transfer deed is executed for the transfer of shares.
The owner must endorse the stock by signing it in the presence of a guarantor, which can be their bank or broker. There may also be a form on the back of the certificate, which relates to the transferring of ownership. After the certificate is complete, it will be rendered non-negotiable and becomes transferable.
There are no fees associated with transferring certificated shares.
- Income Tax PAN. Income Tax PAN of both transferee and transferor.
- Passport Photo. Passport Photo of both the transferee and transferor.
- Aadhaar Card. Voter ID Card of both the transferee and transferor.
- Share Certificates. Original Share Certificates of the Transferor.