A Guide to Share Transfers
Interactively explore the process of changing share ownership in a company, from physical certificates to modern Demat accounts.
What is a Share Transfer?
A share transfer is the voluntary handover of share ownership from a seller (**Transferor**) to a buyer (**Transferee**). It's a legally regulated procedure that ensures the company properly records the change in its Register of Members, ensuring the new shareholder's rights are recognized.
Key Parties Involved
Transferor
The Seller
Transferee
The Buyer
Company
The Issuer
Depository
The Facilitator
How Are Shares Transferred?
The process depends on how the shares are held. Use the buttons below to explore the distinct procedures for Physical and Dematerialized (Demat) shares.
Process for Physical Share Transfer
Execute Transfer Deed (Form SH-4)
Both the transferor and transferee must sign the official Share Transfer Deed, with a witness present.
Pay Stamp Duty
The transfer deed must be stamped to validate it, with the duty calculated on the market value of the shares.
Submit to Company
The stamped deed and original share certificates are sent to the company or its Registrar (RTA).
Board Approval & Update
The company's Board approves the transfer, updates the Register of Members, and issues new certificates.
Process for Dematerialized (Demat) Transfer
Submit Delivery Instruction Slip (DIS)
The transferor gives a signed DIS to their Depository Participant (DP) with details of the transfer.
DP Verification & Execution
The DP verifies the DIS and executes the instruction, debiting the shares from the transferor's Demat account.
Shares Credited to Transferee
The shares are electronically transferred and credited to the transferee's Demat account via the Depository.
Company Intimation
The Depository informs the company/RTA of the change in ownership, which is then updated in the company's records.
Crucial Considerations
FEMA Compliance
If a non-resident is involved, reporting via Form FCTRS is mandatory to comply with FEMA regulations.
Board Discretion
Especially in private companies, the Board retains the right to refuse a transfer if there are legitimate reasons as per the AoA.
Documentation
Ensure all documents (PAN, Address Proof, Transfer Deed) are accurate and complete to avoid rejection.
Companies Act, 2013
The entire transfer process must strictly adhere to the provisions outlined in the Act and its associated rules.
Stamp Duty
For physical transfers, paying the correct stamp duty is a legal requirement for the validity of the transfer.
Professional Help
Given the legal complexities, seeking professional guidance is highly advisable to ensure a smooth process.