Share Transfer Compliance in India
Navigating the process of transferring shares in a company requires compliance with multiple legal requirements. From the execution of transfer deeds to board approvals and statutory filings, proper share transfer compliance is essential to ensure the validity of ownership changes. Here's a comprehensive guide to help you understand and manage this critical aspect of corporate governance.
Key Steps in Share Transfer Process
1. Check Articles of Association (AOA)
The AOA of the company may have specific restrictions or conditions regarding the transfer of shares. Pre-approval from the Board may be required in certain cases.
2. Execution of Share Transfer Deed
A Share Transfer Deed (Form SH-4) must be duly executed and signed by both the transferor (seller) and transferee (buyer) in the presence of witnesses.
3. Stamp Duty Payment
The transfer deed must be duly stamped as per the applicable stamp duty regulations of the respective state.
4. Submission of Transfer Documents to the Company
The following documents must be submitted to the company for processing:
- Duly executed Share Transfer Deed (Form SH-4)
- Share Certificate of the transferor
- Consideration proof (if applicable)
5. Board Approval and Transfer Registration
The Board of Directors must review and approve the share transfer in a Board Meeting. Once approved, the company updates its Register of Members and issues a new share certificate in the transferee's name.
6. Filing with the Registrar of Companies (ROC) (If Required)
In some cases, if the transfer leads to a significant change in shareholding, companies may need to file Form MGT-7A (for small companies) or MGT-7 (for other companies) as part of their annual filings.
Key Compliance Considerations
Restrictions in AOA
If the company's AOA restricts share transfer, prior approval from the Board of Directors or existing shareholders may be needed.
Pricing Compliance
For unlisted public companies, the valuation of shares should be in line with the prescribed guidelines.
FEMA Compliance
If shares are transferred to or from a foreign entity or non-resident individual, compliance with the Foreign Exchange Management Act (FEMA) is required.
Share Transfer Process
Check AOA
Review restrictions & requirements
Execute Transfer Deed
Form SH-4 with signatures
Pay Stamp Duty
As per state regulations
Submit Documents
To the company secretary
Board Approval
In a Board Meeting
Update Records
Register of Members & certificates
Our Share Transfer Compliance Services
- Expert Guidance in ensuring smooth and legally compliant share transfers
- Hassle-Free Documentation for Share Transfer Deeds
- Board & Regulatory Approvals assistance
- Timely Processing to avoid unnecessary delays
- FEMA compliance for foreign entity transfers
- End-to-end process management