Section 44 of the Companies Act, 2013 states that the shares or debentures or other interest of any member in a company shall be movable property, transferable in the manner provided by the articles of the company.
In a private company the shares are not marketable securities due to restriction on right to transfer. Such shares by their very nature are not freely transferable in the market. The objective behind the right of restriction on the transfer of shares is to preserve the composition of the shareholding.
Basic Procedure for Transfer of Share in a Private Company:
- Transferor should give a notice in writing for his intention to transfer his share to the company.
- The company in turn should notify to other members as regards the availability of shares and the price at which such share would be available to them.
- Such price is generally determined by the directors or the auditors of the company.
- The company should also intimate to the members, the time limit within which they should communicate their option to purchase shares on transfer.
- If none of the members comes forward to purchase shares then the shares can be transferred to an outsider and the company will have no option, other than to accept the transfer.
- Get the Share transfer deed in form SH-4 duly executed both by the transferor and the transferee.
- The transfer deed should bear stamps according to the Indian Stamp Act and Stamp Duty Notification in force in the State concerned. The present rate of transfer of shares is 25 Paise for every one hundred rupees of the value of shares or part thereof. Do not forget to cancel the stamps affixed at the time or before signing of the transfer deed.
- The signatures of the transferor and the transferee in the share transfer deed must be witnessed by a person giving his signature, name and address.
- Attach the relevant share certificate or allotment letter with the share transfer deed and deliver the same to the company. The share transfer deed should be deposited with the company within sixty (60) days from the date of such execution by or on behalf of the transferor and by or on behalf of the transferee.
- After receipt of share transfer deed, board shall consider the same. If the documentation for transfer of share is in order, board shall register the transfer by passing a resolution.
Further As per section 58(2), the securities or other interest of any member in a public company shall be freely transferable. The Board of directors of a Company or the concerned depository has no discretion to refuse or withhold transfer of any security. The transfer has to be effected by the company/depository automatically and immediately.
