Share Transfer

Table of Contents

Private Limited Company Share Transfer – Legal Assistance by Nd Salva

Transferring shares in a Private Limited Company is a structured legal process that allows ownership to shift from one person to another. Whether due to business restructuring, personal exit, or investor onboarding, this transfer must comply with the Companies Act, 2013, and the company’s Articles of Association (AOA).

At Nd Salva, we offer comprehensive legal services to assist with the transfer of shares in private companies, ensuring all statutory procedures are followed and the transaction is executed lawfully and smoothly.

What is Share Transfer in a Private Company?

A share transfer is the voluntary handover of ownership rights (and potential obligations) in the company from one shareholder to another. This transfer typically happens when a shareholder exits the company or when new investors are introduced.

Shares in a private company are considered movable property and can be transferred unless restricted by the Articles of Association (AOA).

Governing Laws & Provisions

The share transfer process is governed by:

  • Section 56(1) & (3) of the Companies Act, 2013

  • Rule 11 of the Companies (Share Capital and Debentures) Rules, 2014

  • The company’s Articles of Association (AOA)

These laws ensure that the share transfer process maintains the integrity of ownership and complies with the company’s internal rules.

Key Regulations for Share Transfers in Private Limited Companies

Private companies typically impose restrictions to maintain control over ownership:

1. Pre-emptive Rights

Before offering shares to external parties, the seller must first offer them to existing shareholders at a fair price determined by the Directors or Auditor, as outlined in the AOA.

2. Right to Refuse

The Board of Directors may have the authority to refuse the transfer to an outsider, depending on the AOA clauses.

Always consult the AOA to confirm the company’s position on share transferability.

Parties Involved in Share Transfer

  • Transferor: The current shareholder selling the shares

  • Transferee: The individual/entity purchasing the shares

  • Company: Which facilitates the record update and issuance of share certificate

  • Board of Directors: Approves or declines the transfer

  • Legal representative: In case of share transfer due to death of a shareholder

Documents Required for Share Transfer

Ensure the following documents are prepared for a compliant share transfer:

  1. Share Transfer Deed (Form SH-4) – Signed by both transferor and transferee

  2. Original Share Certificate – Issued by the company

  3. PAN Card of Transferee – For KYC and tax records

  4. Board Resolution – Approving the transfer

  5. No Objection Certificate (NOC) – From the seller (if required)

  6. Indemnity Bond – To protect the company from liabilities (optional)

  7. Stamp Duty Payment – As per state-specific rates under the Indian Stamp Act

Step-by-Step Process for Share Transfer in Private Companies

Step 1: Review the Articles of Association (AOA)

  • Verify any restrictions or conditions related to share transfers.

  • If transfer is restricted, follow the procedure outlined in the AOA to modify or approve the transfer.

Step 2: Notify the Company and Determine Share Price

  • The shareholder submits a written notice to the Board.

  • The share price is determined by the company’s Directors or Auditor based on valuation rules in the AOA.

Step 3: Offer Shares to Existing Shareholders (Right of First Refusal)

  • Circulate an offer to current shareholders with details: price, number of shares, and deadline.

  • If no shareholder expresses interest, the shares can be offered to an external transferee.

Step 4: Execute the Share Transfer Deed (Form SH-4)

  • The form must be:

    • Duly signed by both parties

    • Stamped as per the Indian Stamp Act

    • Witnessed with full details (name, address, signature)

Form SH-4 Exemptions: Not required for transfers:

  • By directors/nominees under Section 187

  • Involving government-controlled entities

  • Secured loans to banks/FIs

  • Debentures using alternate prescribed formats

Step 5: Submit Documents to the Company

  • Submit the duly executed Form SH-4 with:

    • Original share certificate or allotment letter

    • Supporting documents (PAN, indemnity bond, etc.)

Step 6: Company Board Approval

  • The Board of Directors reviews the documents and passes a resolution approving or rejecting the transfer.

Step 7: Issuance of New Share Certificate

  • Once approved, the company:

    • Cancels the original share certificate

    • Issues a new certificate to the transferee

    • Updates the Register of Members accordingly

Legal Considerations & Compliance

Failure to adhere to proper share transfer procedures may result in:

  • Rejection of the transfer

  • Legal disputes or shareholder grievances

  • Regulatory penalties under the Companies Act

It is essential that:

  • Proper stamp duty is paid

  • The AOA is strictly followed

  • Resolutions are accurately recorded and filed

Why Choose Nd Salva for Share Transfer Legal Services?

At Nd Salva, we provide end-to-end legal support for transferring shares in Private Limited Companies, ensuring complete compliance and zero legal hassles.

We Assist With:

  • Reviewing and interpreting the Articles of Association

  • Drafting or vetting the share transfer deed (Form SH-4)

  • Ensuring stamp duty compliance

  • Preparing board resolutions and other required documentation

  • Advising on valuation and legal risk mitigation

  • Coordinating with the company’s secretarial team for issuance of new share certificates

Need Assistance with Share Transfer?

Whether you’re onboarding new shareholders or transferring ownership between stakeholders, our legal team will ensure a compliant, smooth, and secure transfer.

👉 Contact Nd Salva today for expert legal guidance on share transfers in Private Limited Companies.
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