Share Transfer

Change of Ownership Without Changing the Entity

A share transfer allows the ownership of a company to shift from one shareholder to another without altering the structure or continuity of the company. It is a simple, yet critical, transaction in private investments, exit planning, or restructuring scenarios.

What It Means

·       Share Transfer: Transfer of shares by an existing shareholder to another individual or entity.

·      Share Allotment vs. Transfer: Transfer is between existing parties; allotment refers to issuance of new shares by the company.

Governing Laws & Framework

·       Companies Act, 2013 (Sections 56–59)

·       Income Tax Act, 1961 (Section 50CA for FMV-based taxation)

·       FEMA (Non-Debt Instrument Rules) – for foreign investors

·       Stamp Act – governs applicable transfer duty

·       Shareholders' Agreement (SHA) and Articles of Association (AOA) of the company

Process

1.     Review of SHA, AOA and restrictions on transfer (if any)

2.     Execution of Share Transfer Deed (Form SH-4)

3.     Payment of stamp duty (generally 0.25% on consideration in most states)

4.     Delivery of share certificate

5.     Company registers the transfer and updates the Register of Members

6.     Issue of new share certificate to the transferee

Key Benefits

·       Maintains continuity of business

·       Flexible ownership changes without major restructuring

·       Can be executed quickly with minimal filings

Ideal For

·       Promoters exiting or rebalancing shareholding

·       Private investors or family members acquiring equity

·       Internal restructuring of group companies

Basic Requirements

·       Duly stamped and signed SH-4

·       Original share certificate(s)

·       Board approval (unless pre-approved or automatic under SHA)

·       Buyer’s and seller’s identity and consent

How LTC can Help

·       Review of SHA, AOA, and transfer restrictions

·       Drafting of Share Transfer Deed and resolutions

·       Stamp duty computation and payment support

·       All  involved working end-to-end coordination with involved departments