Transferability of shares in private limited companies makes it convenient for shareholders to change their stake amongst the members. Therefore, private limited companies are preferred by entrepreneurs over the other business model.
Transfers of shares in the case of private Limited companies are governed by the provision of the Companies Act, 2013. Therefore, if you want to transfer shares held in private limited companies, then you have to go through the following steps:
1. A proper instrument of transfer, i.e., Form SH. 4, duly stamped, dated, and have to be executed by both transferor and transferee.
2. Form SH. 4 is to be sent to the company within 60 days from the date of execution.
3. Share certificate has to be sent along with Form Sh. 4
This case comes under the transmission of shares, and the conditions cited above shall not be applicable and is done by customary operation laws.
A company shall not register a transfer of partly paid shares unless the company has given a notice in Form No. SH.5 to the transferee, and the transferee has given no objection to the transfer within two weeks from receipt of the notice.
Suppose a private company limited by shares refuses to register the transfer of, or the transmission of the right to, shares. Then the company shall, within thirty days from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, send notice of the refusal to the transferor and the transferee giving reasons for such refusal.
The transferee may appeal to the Tribunal against the refusal within thirty days from the date of receipt of the notice or, if no notice has been sent by the company, within sixty days from the date on which the instrument of transfer or the intimation of transmission.