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Transfer of shares means the voluntary handing over of the rights and possibly, the duties of a member (as represented in a share of the company) from a shareholder who wishes to not be a member in the company any more to a person who wishes of becoming a member. Thus, shares in a company are transferable like any other movable property in the absence of any expressed restrictions under the articles of the company.
Meaning of Transfer and Transmission of Shares in Companies Act 2013
Both Transfer and Transmission of Shares are different from each other. So, let’s understand how they’re different and exactly what is ‘transfer of shares.’
• Transfer of shares means transferring title of shares voluntarily, by one party to another. Whereas, the transmission of shares means, transferring title of shares by the operation of law which a legal heir initiates.
• Transfer of shares has a stamp duty that one needs to pay, based on the market value of shares, whereas in the transmission of shares procedure, there is no stamp duty that one needs to pay
Generally, securities of a company are freely transferable though there may be certain restrictions on the transfer of shares of the private company as provided in the articles.Such restriction on transfer of shares, if one adds any is to protect the interest of shareholders and other security holders.Section 56 of Companies Act 2013 provides that the transfer of shares of the company and other securities will be registered by a company only when a proper instrument for transfer of shares (share transfer form) is filed as prescribed in Form No. SH 4.You need to duly stamp the SH 4 format for transfer of share with adequate value and date. Also, one can execute it by or on behalf of the transferor and the transferee.One needs to send Form SH 4 to the company by the transferor or the transferee of the shares within 60 days from the date of execution, of the share transfer agreement. Along with the share transfer certificate or certificate relating to securities. In case there is no such share transfer certificate, then one must send the application for transfer of shares along with the letter of allotment of securities.Also one must obtain a ‘No Objection Letter’ from the buyer within two weeks from the date of receipt of a notice.
Time Limit on Issuing Share Transfer Certificate
One has to deliver all the share transfer certificates by the company within a period of one month from the date of receipt of the share transfer agreement or the share transfer certificate by the company. Unless the company can’t deliver due to an order of the Court or instruction by other authorities.
A Company having share capital:- The Company shall not register transfer of securities of the Company or member’s interest in the Company other than beneficial owners without a proper instrument of transfer within a period of 60 days from the date of execution.
2. Application by transferor alone:– The transfer shall not be registered until and unless the company gives notice of the application to transferor and transferee gives no objection certificate within 2 weeks from receipt of the notice.
3. Company shall deliver certificates of all securities allotted/ transferred/ transmitted in the following cases and within the following mentioned time limits:-
In case of subscribers to memorandum – within a period of 2 months from the date of incorporation.
• In case of allotment of any of its shares – within a period of 2 months from allotment date.
• Receipt by the company of the instrument of transfer/ intimation of transmission – within a period of 1 month from the date of receipt.
• Allotment of debenture – within a period of 6 months from the date of allotment.
Stamp Duty on the Transfer of Shares
One has to duly stamp the share transfer form, Companies Act 2013 says so. It also adds that the stamp should have adequate value with the date.
Also, it should be cancelled in accordance with Section 12 of the Indian Stamp Act(2), when you have to send the share transfer form is to be sent to the board of directors.
The seller of the shares has to pay the stamp duty at the rate of Rs 0.25 for every Rs. 100 worth of shares. For stamping purpose in a transfer of shares special adhesive stamps having the word ‘share transfer’ shall be used.
Section 8A of the Indian Stamp Act provides that for the electronic share transfer form, India. You can pay the stamp duty on the total amount of issuing the shares or securities.
One is not liable to pay stamp duty in case of transfer of registered ownership of share from a person to a depository or from a depository to a beneficial owner.
Penalty for Non-compliance
As per the provisions of the Act, where there is a non-compliance by the company of the provisions relating to the transfer of shares, the company shall be punishable with the fine not less than Twenty-Five Thousand Rupees but which may extend to Five Lac Rupees and every officer in default will be punishable by a fine not less than Ten Thousand Rupees but which may extend to One Lac Rupees.