Share transfer process

This query is : Resolved

Guest

Guest (Querist)

08 October 2013 Hi,

Someone may please guide, if possible:

Query 1

A friend of mine is a Director in a private limited company (not a subsidiary of any company).

He proposes to resign from the directorship (the process of which, I am aware) and transfer shares to the new incoming Director (who shall take the shares).

May I request someone to elaborate the practical steps from the beginning from my friend’s point of view, his responsibility and the company’s responsibility as well?

Ans : ……………

If any URL available with detailed steps on such process, please share so that I will go through the same and understand the subject.

Thanks in advance for your replies.

Ajay Mishra

Ajay Mishra (Expert)
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08 October 2013
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.
(V) the transferor will submit the following documents with company:
(a) Original Share certificate
(b) Transfer deed (Form-7B) properly executed with stamp duty of proper amount.
© any other documents relating thereto.

It is to be noted that any transfer of shares to an outsider without complying with the procedure as specified in the articles for effecting transfer of shares will not be operative against the company. Even in the case where the procedure prescribed by the articles was not followed and such failure was not due to any fault on the part of the selling shareholder, the transfer to an outsider was held not to be effective.
Transfer of shares without consent of holder of shares and without prior sanction of board of directors as required under articles of association of a private company concerned could not be held to be valid. [John Tinson Co. (P) Ltd. v Mrs. Surjeet Malhan (1997) 88 Comp Cas 750 (SC)].

Ajay Mishra

Ajay Mishra (Expert)
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08 October 2013 On part of the Company:

Procedure for Transfer of shares of the Company:

1. After receiving Transfer Deed(Instrument of Transfer), Share Certificate and other documents, if any.
2. Check all documents is proper and eligible to register for transfer.
3. Call Board Meeting
4. At Board Meeting register the Transfer and made entry in the Register of Members and Register of Transfer.
5. Return the Share Certificate after making entry of transfer therein within 2 months.
6. Make entry in the minutes of Board Meeting.
7. The detail of Transfer from last AGM till the date of AGM should be submitted in Annual Return to ROC in Form-20B.

Guest

Guest (Querist)

10 October 2013 Thanks a lot for your guidance.
- - - - -

If the company is a loss company, can the share price be fixed at face value.

Ans : ...............

Say the value of share transfer is Rs.5 Lacs, how the transferor will comply with stamp duty? (Is it 25 paise per 100?).

Ans : ...............

While filling the Form-7B, the transferor should fill relevant details from the share certificate issued, sign at one place only (straight across the name) and thereafter, transferor should get signature of a witness with name and address in full. Please confirm.

Ans : ...............

Thanks in advance for your replies.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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25 July 2025 Here’s a detailed guide answering your queries about share transfer when a director resigns and transfers shares to a new director in a private limited company:

Query 1: Practical Steps for Share Transfer & Director Resignation
From the Transferor (Current Director) Point of View:

Resignation as Director:

Submit a written resignation letter to the Board.

Company files DIR-12 with ROC within 30 days to notify the resignation.

Share Transfer:

Execute a Share Transfer Deed (Form SH-4) signed by transferor and transferee.

The transferor surrenders original share certificates to the company.

Pay applicable stamp duty on the transfer deed.

Company’s Responsibilities:

Board Meeting:

Convene a board meeting to approve the resignation and share transfer.

Record minutes approving the share transfer.

Register of Members:

Update the Register of Members to reflect the transfer.

Cancel old share certificates and issue new certificates to the transferee.

Filing with ROC:

File MGT-7 (Annual Return) and SH-7 (Return of Allotment) if shares are newly issued (not needed for transfer).

No separate ROC filing is required just for transfer unless share capital changes.

Query 2: Share Price for Loss-Making Company
The share price can be fixed at face value if the company is incurring losses or if agreed between parties.

However, valuation should reflect a fair price unless there’s a specific reason to fix it at face value.

If in doubt, get a valuation from a registered valuer.

Query 3: Stamp Duty on Share Transfer of Rs. 5 Lacs
Stamp duty rates vary by state but commonly for share transfer deeds:

Approximately 0.25% (25 paise per 100) on the consideration amount.

So, for Rs. 5,00,000, stamp duty would be roughly Rs. 1,250.

Check the local Stamp Act for exact rates and rules.

Query 4: Filling Form 7B (Share Transfer Form)
Correct procedure:

Transferor fills in details from the share certificate.

Transferor signs across the name on the form.

A witness must sign the form as well, providing name and full address.

This authenticates the transfer deed legally.

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