22 November 2022
One of the Company Directors are planning to transfer shares to their children. What are the formalities and compliances with ROC's related these proceedings ??
11 July 2024
Transferring shares from a director to their children involves several formalities and compliances with the Registrar of Companies (ROC) in India. Here’s a step-by-step guide on what needs to be done:
### 1. Check Articles of Association (AoA) and Shareholders Agreement:
- **Review**: First, review the company's Articles of Association (AoA) and any existing Shareholders Agreement. These documents may contain specific provisions regarding the transfer of shares, including any restrictions or pre-emption rights that need to be considered.
### 2. Board Resolution:
- **Board Meeting**: Convene a board meeting where the transfer of shares will be discussed and approved. - **Board Resolution**: Pass a resolution approving the transfer of shares from the director to their children. The resolution should specify the number of shares, the consideration (if any), and authorize a director or any authorized signatory to execute the transfer documents.
### 3. Share Transfer Deed:
- **Prepare Transfer Deed**: Prepare a share transfer deed in the prescribed format (Form SH-4 under Companies Act, 2013). This deed should be signed by both the transferor (director) and the transferee (children).
### 4. Stamp Duty:
- **Payment of Stamp Duty**: Determine the stamp duty payable on the share transfer deed as per the applicable Stamp Act in your state. Stamp duty rates vary, so consult with a professional or the local Registrar for the correct amount.
### 5. Filing with ROC:
- **Form SH-4**: Complete and file Form SH-4 along with the share transfer deed with the ROC within 60 days from the date of execution of the deed. - **Attachments**: Attach the board resolution approving the transfer and any other required documents (like share certificates, if applicable).
### 6. Register of Members:
- **Update Register**: Update the company’s Register of Members to reflect the transfer of shares. The register should now show the children as the new shareholders of the transferred shares.
### 7. Intimation to Depository (if applicable):
- **Demat Shares**: If the shares are held in dematerialized form (in a depository), the transferor should instruct the depository participant (DP) to transfer the shares to the account of the transferee.
### 8. Compliance Certificate:
- **Obtain Certificate**: After filing Form SH-4 with the ROC and receiving approval, obtain a compliance certificate (Form PAS-3) from a practicing Company Secretary or Chartered Accountant. This certificate confirms that all provisions of the Companies Act regarding share transfers have been complied with.
### Additional Considerations:
- **Tax Implications**: Consult with a tax advisor to understand any tax implications of the share transfer, such as capital gains tax. - **Disclosure**: Ensure all disclosures required under the Companies Act and other applicable laws are made accurately and timely.
By following these steps and ensuring compliance with legal requirements, the transfer of shares from a director to their children can be executed smoothly and in accordance with company law in India.
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