Company Share Transfer (SH-4) Online Process

Share transfer in a company is like giving away your ownership rights to someone else who wants to be part of the company, as long as the company’s rules don’t say you can’t.

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Overview of Company Share Transfer

A Share Transfer Certificate is a document issued by a company to acknowledge the transfer of shares from one party to another, as per the Companies Act, 2013, and associated rules. This certificate serves as proof of ownership transfer and must be issued after the company receives a valid instrument of transfer (Form SH-4), along with the original share certificate and requisite transfer stamps.

Under the Companies Act, 2013, the Board of Directors must approve the share transfer within 15 days of receiving the transfer request. Once approved, the company is required to endorse the share certificate and issue a new one in the transferee’s name within 30 days. This process ensures legal compliance and proper documentation of ownership changes, maintaining transparency and accuracy in the company’s shareholding records.

blank-paper-sheet-with-small-scooter-table
blank-paper-sheet-with-small-scooter-table

A Share Transfer Certificate is a document issued by a company to acknowledge the transfer of shares from one party to another, as per the Companies Act, 2013, and associated rules. This certificate serves as proof of ownership transfer and must be issued after the company receives a valid instrument of transfer (Form SH-4), along with the original share certificate and requisite transfer stamps.

Under the Companies Act, 2013, the Board of Directors must approve the share transfer within 15 days of receiving the transfer request. Once approved, the company is required to endorse the share certificate and issue a new one in the transferee’s name within 30 days. This process ensures legal compliance and proper documentation of ownership changes, maintaining transparency and accuracy in the company’s shareholding records.

Importance of Share Transfer Certificates

Share Transfer Certificates are vital for validating and recording the change in ownership of a company's shares.

Proof of Ownership
Transparency
Compliance
Dispute Resolution
Record Accuracy
Investor Confidence
Proof of Ownership

They act as definitive legal proof of share ownership.

Transparency

Ensure transparency in the company's shareholding structure.

Compliance

Aid in compliance with legal and regulatory requirements.

Dispute Resolution

Serve as key documents in resolving any ownership disputes.

Record Accuracy

Help maintain accurate and up-to-date shareholder records.

Investor Confidence

Enhance investor confidence in the company's share management practices.

Persons Involved in Share Transfer

Transferor (Seller)
Transferee (Buyer)
Company's Board of Directors (Listed/Unlisted)
Company Secretary
Legal Representative

The current shareholder who is selling or transferring the shares.

The person or entity receiving the shares and becoming the new owner.

Authorizes the share transfer and issues the Share Transfer Certificate.

Often oversees the share transfer process, ensuring legal compliance and proper documentation.

Legal Representative transfers deceased’s shares as per the will or law to the chosen beneficiary.

Documents required for share transfer certificate

Document Type Description Applicability

Original Share Certificate

Certificates representing the shares being transferred, providing proof of the transferor's share ownership.

Required for all share transfers

Self-Attested Copy of PAN Card

Mandatory for all transactions involving share transfers to validate the identities of the transferor and transferee.

Required for all share transfers

Identification Proofs

Self-attested copies of valid identity proof like Aadhaar, Passport, or Driving License of both parties.

Required for all share transfers

Address Proofs

Self-attested copies of address proofs to confirm the current addresses of both parties involved in the transfer.

Required for all share transfers

Death Certificate

Needed to confirm the demise of the shareholder and initiate the transfer process.

Required when the transfer involves the estate of a deceased shareholder

Succession Certificate, Probate, or Letter of Administration

Establishes the legal heirs or executors to the deceased's estate, including shares.

Required when the transfer involves the estate of a deceased shareholder and to legally establish the rightful heirs

Procedure for Transfer of shares under the companies act,2013.

Obtaining a Share Transfer Certificate in a company in India is a systematic process governed by the Companies Act, 2013, and involves several key steps to ensure legal compliance and transparency. Here’s a detailed overview of the process:

Initiation: The share transfer process begins with the execution of a Share Transfer Deed by both the transferor (current shareholder) and the transferee (new shareholder). In India, this deed is prescribed as Form SH-4.

Details to Include: The form must include comprehensive details such as the names and addresses of the transferor and transferee, the class and number of shares being transferred, and the share certificate number.

Legal Requirement: Payment of stamp duty is mandatory on the share transfer deed, and the rate varies from state to state within India.

Proof of Payment: The transfer deed must be stamped with the requisite duty to be considered valid for processing.

Document Submission: The duly filled and stamped Share Transfer Deed, along with the share certificate(s), is submitted to the company for processing.

Supporting Documents: Additional documents, such as identity proofs of the transferor and transferee, may also be required.

Board Review: The company’s board of directors reviews the submitted documents to ensure compliance with the Articles of Association and the Companies Act, 2013.

Verification Process: The company verifies the authenticity of the documents and the eligibility of the transferee to hold shares.

Resolution for Transfer: Upon satisfactory verification, the board passes a resolution approving the share transfer.

Legal Compliance: The approval process ensures that all legal and procedural requirements are met.

Certificate Preparation: The company prepares the Share Transfer Certificate in the name of the transferee once the board approves the transfer.

Record Update: The company updates its Register of Members to reflect the transfer, recording the transferee as the new shareholder.

Dispatch to Transferee: The Share Transfer Certificate is dispatched to the transferee, officially completing the transfer process.

Acknowledgment: The transferee acknowledges the receipt of the Share Transfer Certificate, confirming the completion of the process.

Time Frame

Legal Mandate: As per the Companies Act, 2013, the entire process, from submission to the issuance of the Share Transfer Certificate, should ideally be completed within one month.

How V Smart Auditor Can Help ?

  • Guidance on Documentation

    Provides expert advice on compiling all necessary documents for a smooth transfer process, ensuring nothing is overlooked.

  • Form Filling Assistance

    Helps accurately fill out the Share Transfer Form (Form SH-4) and ensures that it's duly stamped, mitigating the risk of rejections due to errors.

  • Legal Compliance

    Ensures that all steps of the share transfer adhere to the Companies Act, 2013, and other relevant legal frameworks, reducing compliance risks.

  • Liaison with Company

    Acts as an intermediary between the transferor, transferee, and the company, facilitating communication and the submission of documents.

  • Follow-up on Transfer Approval

    Monitors the progress of the share transfer process, keeping all parties informed and pushing for timely approvals.

  • Post-Transfer Support

    Assists in verifying the receipt of the new Share Transfer Certificate and ensures that company records are updated accordingly.

Frequently asked questions

What is a Share Transfer Certificate (STC)?

A Share Transfer Certificate is a legal document issued by a company to acknowledge the transfer of shares from one person to another.

Why is a Share Transfer Certificate important?

STCs serve as evidence of the change in ownership of shares and are often required for transactions involving shares, such as selling or pledging them.

When is a Share Transfer Certificate issued?

A Share Transfer Certificate is typically issued when an individual or entity transfers their shares in a company to another party, either voluntarily or due to inheritance, sale, or other reasons.

What information is included in a Share Transfer Certificate?

An STC typically contains details such as the name of the company, the name of the shareholder transferring the shares, the name of the transferee, the number of shares transferred, the date of transfer, and a unique certificate number.

Is it necessary to obtain a Share Transfer Certificate when transferring shares in a private company?

Yes, even in private companies, it is generally advisable and sometimes legally required to obtain a Share Transfer Certificate to record and acknowledge the transfer of shares.

How do I apply for a Share Transfer Certificate?

To obtain an STC, you should contact the company's registrar or transfer agent, provide the necessary documents and information related to the share transfer, and follow the company's prescribed procedures.

Is there a fee associated with obtaining a Share Transfer Certificate?

Companies may charge a fee for issuing a Share Transfer Certificate. The fee can vary depending on the company's policies and regulations.

Can a Share Transfer Certificate be used as proof of ownership for shares?

Yes, a Share Transfer Certificate is an important document that serves as proof of ownership and is often required when you want to exercise your rights as a shareholder, such as voting at meetings or receiving dividends.

Can a Share Transfer Certificate be transferred or traded like shares themselves?

No, a Share Transfer Certificate is not a negotiable instrument; it is a document that acknowledges the change in ownership of shares but cannot be traded or transferred independently.

What should I do if I lose my Share Transfer Certificate?

If you lose your STC, you should immediately inform the company's registrar or transfer agent. They will guide you on the process for obtaining a duplicate certificate, which typically involves providing an indemnity bond and paying a fee.