19 February 2010
Meaning of transfer of share The word 'transfer of share' is an act of the parties (transferor and transferee) by which title to share is transferred from one person to another. Transfer of share may also take place succession.
Transfer Deed is compulsory for share transfer In Companies Act, 1956 transfer of share is governed by Section 108. As per section 108 a company shall not register a transfer of shares of, the company, unless a proper transfer deed in Form 7B duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company, alongwith the share certificate, and where no such certificate is in existence, attach letter of allotment with of the share transfer deed. Duly stamped means stamp of adequate value should be affixed and cancelled on share transfer deed. However, no need to pay stamp duty where shares are in Demat form.
Rate of Stamp duty Stamp duty for transfer of shares is 25 paise for every Rs. 100 or part thereof of the value of shares as per Notification No. SO 130(E), dated 28-01-2004 issued by the Ministry of Finance, Department of Revenue, New Delhi.
Submission of instrument for transfer to the Company Transfer Deed duly executed for the registration of a transfer of the shares or other interest of a member in a company may be submitted either by the transferor or by the transferee together with the relevant share certificates.
PROCEDURE FOR EXTENSION OF VALIDITY OF TRANSFER DEED Where the validity period of an instrument of transfer has expired, the holder may make an application in Form 7C to the Registrar of Companies requesting for extension in the validity. The fee for such application is Rs.50 where the nominal value of the shares is upto Rs. 5,000 and the fee is Rs. 100 where the value exceeds Rs. 5000.
The application shall be made to the Registrar of Companies, where the registered office of the Company is situated or under whose jurisdiction the transferor or transferee resides. The Registrar on satisfaction of the cause shown in the application shall extend the validity for a period of 30 days from the date of approval by the Registrar. It should be noted that further extension will not be provided by the Registrar. Therefore, the transfer deed should be lodged with the company within the extended period only.
TRANSFERABILITY OF SHARES IN A PRIVATE COMPANY
Private company shall restrict right to transfer its shares Entire shareholding of a private company may be owned by a family or other private group. Section 3(1)(iii)(a) of the Companies Act, 1956 provides that the Articles of a private company shall restrict the right to transfer the company's shares.
Procedure for transfer of shares of private company Generally articles contain the detailed provisions as regards the procedure for transfer of shares. Usually following steps shall be followed by a private company to give effect to the transfer of shares:—
(i) Transferor should give a notice in writing for his intention to transfer his share to the company.
(ii) 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.
(iii) Such price is generally determined by the directors or the auditors of the company.
(iv) 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.
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