Share Transfer - Move Shares Between Shareholders, Correctly

A share transfer is the voluntary movement of existing shares from one person (transferor) to another (transferee) - for example, between two shareholders, or from a founder to a new investor. It does not create new shares or change the company's total issued capital, unlike an allotment.

Form SH-4 is the 'instrument of transfer' prescribed under Section 56 of the Companies Act, 2013 - the legal document used to transfer shares in an Indian company. It must be signed by both the transferor and transferee, properly stamped, and delivered to the company within 60 days of execution.

A transfer moves existing shares between two people with no change in the company's total issued capital. An allotment creates and issues new shares, increasing the company's total issued share capital. They use different processes and different forms (SH-4 for transfer, PAS-3 for allotment).

Yes - stamp duty is payable on the transfer deed (Form SH-4) at a uniform rate of 0.015% of the consideration or market value (whichever is higher), under Article 62 of the Indian Stamp Act, 1899, as amended by the Finance Act, 2019 (effective 1 July 2020). This rate applies uniformly across India for both physical and dematerialised share transfers - it no longer varies by state. Under current rules, the buyer (transferee) is liable to pay this duty.

Yes. Private companies commonly restrict transferability in their Articles of Association, and the board can decline to register a transfer if it does not comply with the AOA's requirements - such as a right-of-first-refusal process not being followed, or an improperly executed transfer deed.

In most private companies, yes - unless the Articles of Association delegate this authority elsewhere. The board typically passes a resolution approving the transfer before the register of members is updated.

The executed and stamped Form SH-4, along with the relevant share certificate, must be delivered to the company within 60 days of execution.

Within one month of the transfer being registered by the board, per Section 56(4)(c) of the Companies Act, 2013.

A clause commonly found in a private company's AOA or shareholders' agreement that requires shares being sold to first be offered to existing shareholders before being transferred to an outside buyer. Skipping this step can put the validity of the transfer at risk.

Not always, but it's recommended for related-party transfers or transfers not conducted at arm's length, to document that the transaction value is fair - useful if the transaction value is ever questioned by tax authorities or other shareholders.

A share purchase agreement documenting commercial terms is not always legally mandatory for a simple transfer, but Form SH-4 itself is mandatory - it is the instrument the company relies on to record the change in ownership.

The transferor typically needs to apply for a duplicate share certificate from the company (following the company's own process for lost certificates) before the transfer can proceed, since the original certificate is normally required to be lodged along with Form SH-4.

Yes, shares can be gifted or transferred for nominal or no consideration using the same Form SH-4 process, though stamp duty is still generally payable and the transaction may have income tax implications worth checking with a tax advisor.

No. A share transfer only changes who holds existing shares - it has no effect on the company's authorised capital, issued capital, or paid-up capital, all of which only change through an allotment or a formal capital change process.

Typically PAN, address proof, and signature on Form SH-4 as the transferee. If the transferee is a new shareholder (not previously on the company's register), the company will also record their details in the register of members upon approval.