11 July 2024
In the case of transferring shares from a deceased director to other directors in a private company, the process typically involves several steps and documentation to ensure compliance with legal requirements. Here’s a detailed procedure:
### Procedure for Transfer of Shares from Deceased Director to Other Directors:
1. **Obtain Death Certificate**: Obtain a certified copy of the death certificate of the deceased director from the relevant authorities.
2. **Identify Legal Heirs**: Identify the legal heirs of the deceased director who are entitled to inherit the shares. This may include spouses, children, or other beneficiaries as per the deceased director's will or legal succession laws.
3. **Share Transfer Process**: - **Board Resolution**: The board of directors of the company should convene a meeting to pass a resolution approving the transfer of shares from the deceased director to the legal heirs.
- **Share Transfer Agreement**: Prepare a Share Transfer Agreement detailing the transfer of shares from the deceased director's estate to the legal heirs. This agreement should include details of the deceased director, the legal heirs, the shares being transferred, consideration (if any), and terms of transfer.
- **Execution of Form SH-4**: The legal heirs (transferees) should execute Form SH-4 for transferring the shares. Form SH-4 is used for transferring shares from one person to another and requires details of the transferor (deceased director's estate) and transferees (legal heirs).
- **Death Certificate**: Attach a certified copy of the death certificate of the deceased director with Form SH-4.
- **Board Resolution**: Pass a board resolution approving the transfer and authorizing a designated director or officer to execute Form SH-4 on behalf of the company.
4. **Stamp Duty**: Ensure that the Share Transfer Agreement is stamped as per the applicable stamp duty rates prescribed by the respective state government.
5. **Filing with Registrar of Companies (ROC)**: - File Form SH-4 along with the board resolution and other required documents with the ROC within 60 days from the date of execution of Form SH-4. - Pay the prescribed filing fees to the ROC along with the submission of Form SH-4.
6. **Update Shareholders Register**: After approval from the ROC, update the company's shareholders register to reflect the transfer of shares to the legal heirs of the deceased director.
### Documents Required:
- Certified copy of the death certificate of the deceased director. - Board resolution approving the share transfer. - Share Transfer Agreement detailing the terms of transfer. - Form SH-4 duly filled and signed by the legal heirs (transferees).
### Additional Considerations:
- **Legal Advice**: It is advisable to seek legal counsel to ensure compliance with all applicable laws and regulations related to the transfer of shares.
- **Tax Implications**: Consider any tax implications arising from the transfer of shares, especially inheritance tax or capital gains tax.
- **Shareholder Agreement**: If there is a shareholder agreement in place, ensure that the transfer complies with its provisions.
By following these steps and completing the required documentation, you can transfer shares from a deceased director to other directors or legal heirs in a private company in accordance with legal requirements.
13 July 2024
Sir, thanks for your reply, can this transfer be done by an affidavit signed by the legal heirs for no objection for transferring the shares to the other directors? And since the shares are not demated yet do we have to first demat the shares and then transfer? Please advise.
CAclubindia
