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Company Share Transfer

The proprietorship of a company limited by share is held by the investors of the company. Proprietorship of a company rests with the shareholders and not the Directors. Allocation of proprietorship of a company can so be consummate by moving shares of the company from one person or unit to a different. Share transfer in a private limited company is typically more controlled when associated with a listed company that is publicly dealt. Therefore, most of the Articles of Association of a Private Limited Company limit the right of a stockholder to transfer the company's shares to an unknown. Therefore, it is significant to analysis the Articles of Association of the Company previous to affecting a share transfer.

Reasons of Share Transfer

  • Shareholders: - Shareholders are the legal owners of the company. They can also be NRI of Foreign Nationals or foreign entities.
  • Directors: - Directors of company are appointed by the shareholders of company to manage the affairs of the company.
  • Article of association: - It is company define the rights and responisbilities of shareholders and directors.
  • Authorised capital: - The authorised capital of a company determines the value and number of shareholders.
  • Paid up capital: - Paid up share capital of a company is the amount of money for which shares were issued to the shareholder for which payment was made by the shareholder.
  • The companies Act, 2013 defines private company in Section 2(68)
  • Private company means a company having a minimum paid up share capital of one lakh rupees or such higher paid up share capital as may be prescribed. This agreement allows following
  • Restricts the right to transfer its shares
  • Limits number of its members to two hundred. (Exception one person company)
  • Prohibits invitation to the public to subscribe for any securities of the company.

Shares Transfer Procedure:

Generally the procedure for of shares transfer in a private company is stated in company’s Article of Association. If any shareholder whether preference or equity wish to transfer his shares, then he can take the following steps:

Step 1 Step 1

The one who intended to transfer his shares, he should give in writing his intention to transfer shares to the company.

Step 2 Step 2

The Company will notify to other member of the company regarding the availability of shares.

Step 3 Step 3

Company’s board of directors and auditors generally decides the price of the share.

Step 4 Step 4

If no other member has come forward in order to purchase the available shares, then the person can transfer his shares to an outsider by issuing Form 7B.

Shares Transfer Rules:

Transferor and Transferee should follow

Step 1 Step 1

The transferor should obtain the transferor deed in the prescribed format.

Step 2 Step 2

The transfer deed should be duly signed by the transferor and transferee.

Step 3 Step 3

Stamp the share transfer deed according to the Indian Stamp Act and Stamp duty notification.

Step 4 Step 4

The deed should be signed by the witness and also mentioned his/her name and address.

Step 5 Step 5

The share certificate and allotment letter should be enclosed with the transfer deed and deliver the same to the company.

Step 6 Step 6

The Company will further process the documents and if it gets approved, the company will issue the new certificate in the name of the transferee.

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