The shareholders of the private limited company are considered to be the owners. There are specific procedures given under the Companies Act, 2013 to be followed in case of transfer of the shares from one person to another.

Share Transfer Procedure Initiation

• Review the AOA: The Transfer cannot be made if the Articles of Association (AOA) of the Private Limited Company restricts. Hence, AOA has to be reviewed on this aspect.

• Shareholder must give notice in writing to the Company about intention to transfer share of the company to another person.

• The Company shall determine the price at which the shares of the Company is to be offered and the shares has to be first offered to the existing shareholders of the Company.

• The company must then give notice to outsiders about the availability of share, the last date to purchase the shares and the price at which the share are available to them.

Steps Involved

• Step 1: Obtain share transfer deed in Form SH-4.

• Step 2: The share transfer deed has to be signed by both transferor and transferee.

• Step 3: The share transfer deed has to be stamped as per the regulations. The stamp has to be made in accordance with Indian stamp Act and stamp duty notification in force in the state concerned. The present stamp duty rate for transfer of share is 25 paise for every one hundred rupees of the value of the share or part thereof. That means for shares valued at Rs. 2,500/- the stamp duty will be Rs. 6.25/-​

• Step 4: The transfer deed has to be signed by one witness.

• Step 5: The duly signed transfer deed along with the share certificate has to be filed with the Company.

• Step 6: The company must process the documents and if approved, issue new share certificate in the name of the transferee.

• Step 7: Transfer agreement may be executed at the option of the transferor and transferee.