Get a Quote
Get a Quote and Find Services to Fit Your Needs 50000+ Satisfied Clients
5000+ Licenses & Registration
15 Branches across India
75 Years + Combined experience
The need for transfer of shares in a private limited company arises when a shareholder wants to sell their shares. Share transfer in a pvt limited company allows the transfer of ownership from one shareholder to another one. If you want to learn how to transfer share in private limited company in India, we recommend you to go through this article!
Share transfer means transferring ownership of a company’s shares from one shareholder (transferor) to another shareholder (transferee). It is a voluntary act where a shareholder relinquishes their rights and responsibilities associated with their shares to a new owner/shareholder who effectively becomes a member of the company.
This procedure involves a share transfer deed (i.e., transfer shares agreement), transfer shares stamp duty and company approval, and is similar to how any movable asset is transferred (unless Articles of Association imposes certain restrictions).
Here are the major parties involved in transfer process for shares of a private limited company:-
Transferor:- It refers to the shareholder having the intention to give his transferable shares.
Legal Representative (in case of deceased shareholder):- A legal representative is the person legally authorized to act on deceased shareholder’s behalf.
Transferee:- Transferee means the individual or party having the intention to acquire transferable shares of the transferor.
Board of Directors:- The Board of Directors has the responsibility to monitor the entire procedure of transfer of shares in a private company.
Other Shareholders/Company:- This refers to the existing shareholders and the private limited company itself.
For transfer of the shares in a private company, you need certain documents, including:-
Share Transfer Deed:- It is also known as transfer shares agreement. It requires signatures from both the transferor and transferee to facilitate transferring of the shares.
Share Certification:- The transferor must provide original share certificate at the time of share transfer deed’s submission.
PAN Card:- For transferring of shares, the transferee’s PAN card photocopy is a must.
Payment of Transfer Shares Stamp Duty:- The share transfer deed requires stamp duty payment. The amount varies according to the State/UT.
Indemnity Bond:- The transferee might have to provide indemnity bond to protect the company against potential losses pertaining to transfer of shares.
Board Resolution:- The Board of Directors of the company must endorse transferring of shares via formal resolution.
No Objection Certificate:- The transferor must provide an NOC that confirms their consent for the transfer of their company shares.
For transferring shares in a private ltd company, the following steps are involved:-
Before you begin the share-transfer process for pvt ltd company, it is important that you go through the Articles of Association and shareholders agreement. These documents might contain particular clauses about the transfer of shares, such as approval requirements or pre-emption rights.
If one of the shareholders wants to exit the company and sell/transfer their shares, they must first inform the existing shareholders about it. This is done under contractual obligation termed ‘Right Of First Refusal’. This right is necessary as it provides existing shareholders with the first chance to buy those shares. If none of them shows interest, only then the selling shareholder has the liberty to offer shares to an external buyer.
Once all the necessary approvals are obtained, the share-transfer deed/agreement is drafted. This document outlines key transaction details like the no. of shares being transferred, the agreed-upon sale price and any warranties or representations made by parties involved.
After signing the Transfer Agreement, both the transferor and transferee must fill out the Share-Transfer Form known as Form SH-4. This is a mandatory requirement under Section 56 of the Companies Act, 2013.
Also, the transferor and transferee need to submit supporting documents like the original share certificates and a copy of the Board Resolution approving the transfer.
Share transfers in India are subject to stamp duty, which varies depending on the state where the company is registered as well as the value of the shares being transferred. To make the transfer legally valid, the agreement must be duly stamped with the correct duty amount as per the applicable State/UT law.
In several cases, it is a must to secure approval of shares transfer from the Board of Directors. In addition to this, additional approvals from shareholders and regulatory bodies might be necessary as per internal rules and governing documents of the company.
Once all documents are submitted and the transfer is verified, the company updates its records and issues a new share certificate in the transferee’s name. This certificate officially confirms the new shareholder’s ownership of the transferred shares.
For companies with share capital, the transfer of securities or any member’s interest (except when done by the beneficial owner) must be backed by a valid instrument of transfer. This transfer must be registered within 60 days from the execution date.
If the transfer request is made solely by the transferor, the company cannot proceed with registration until it has notified the transferor and the transferee has provided a no-objection certificate within two weeks of receiving the notice.
The company is also required to issue share or debenture certificates within specific timeframes, depending on the situation:-
For subscribers to the Memorandum:- Certificates must be issued within 2 months from the incorporation date.
For fresh allotment of shares:- Certificates should be delivered within 2 months from the date of allotment.
For transfer or transmission of securities:- Certificates must be issued within 1 month from the date the company receives the transfer instrument or transmission intimation.
For allotment of debentures:- Certificates must be delivered within 6 months from the allotment date.
The transfer of a private ltd company’s share is a process where an existing shareholder transfers their shares to another shareholder. It requires certain formalities like transfer deed, stamp duty, approval by board of directors, filing SH-4 form and more.
If you need assistance in filing business forms with RoC and ensuring compliance with legal and regulatory requirements under Companies Act 2013, connect with Registrationwala’s experts!
Postface: This post was originally published in 2018 and has been updated on June 16, 2025, to provide you with the most current and accurate information.
Want to know More ?
