Transfer of shares in case of private company

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Ankur Agarwal (Querist)
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17 February 2023 An existing shareholder of a private limited company has transferred the shares to the outsiders without giving any notice to the company. In the company's books old shareholders name is still there. Now what will be the consequences if we intimate the company about it and can we file the transfer deed i.e. form SH4 in backdate?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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11 July 2024 If a shareholder of a private limited company transfers shares to outsiders without notifying the company and updating the company's records, there are several considerations and steps to address the situation:

### Consequences and Steps to Take:

1. **Intimating the Company**:
- The first step should be to notify the company about the transfer of shares. This notification should include details of the transfer, such as the date of transfer, the new shareholder's details, and any supporting documents (like the share transfer deed).
- The company will need to update its records and amend the shareholder register to reflect the new ownership of the shares.

2. **Form SH-4 (Share Transfer Form)**:
- Form SH-4 is typically used to officially transfer shares from one shareholder to another. It requires details such as the names of the transferor (seller) and transferee (buyer), the number and class of shares transferred, consideration paid (if any), and the date of transfer.
- Filing Form SH-4 with the Registrar of Companies (ROC) is mandatory within 60 days of execution of the transfer deed.

3. **Backdating Form SH-4**:
- Generally, filing Form SH-4 in backdate (i.e., filing it after the actual transfer date has passed) is not permissible under normal circumstances. The filing should ideally be done within the stipulated timeframe to avoid penalties or legal issues.
- If there is a genuine reason for the delay in filing (such as oversight or lack of information), it is advisable to consult with a company secretary or legal advisor to determine the appropriate course of action.

4. **Consequences of Non-Disclosure**:
- Non-disclosure of the transfer could lead to complications in corporate governance and compliance. It may affect the accuracy of financial statements, voting rights, and dividend distribution.
- From a legal standpoint, failure to update the shareholder register and inform the company about the transfer could result in violations of company law and regulations.

5. **Legal Advice**:
- It is recommended to seek legal advice from a qualified professional (company secretary or lawyer) to assess the specific circumstances and determine the best approach for rectifying the situation.
- The legal advisor can guide on the proper documentation, filing procedures, and any implications of the transfer under company law and tax regulations.

In summary, while it's crucial to notify the company about the transfer of shares and update the shareholder register promptly, filing Form SH-4 in backdate is generally not permissible and may require careful handling and legal consultation to ensure compliance and mitigate any potential risks or penalties.