No Money and No SH-4

Hello,

Scenario 1:

Company nor the shareholder has signed the SH-4 transfer form.

No monetary transaction took place.

But the company has added the shareholder to the balance sheets.

Is the share transfer valid?

Can the shareholder be removed from the balance sheet?

Replies (4)
Quick Summary
This discussion addresses the validity of share transfers when neither the company nor the shareholder has signed the SH-4 form and no monetary transaction has occurred. It clarifies that a company cannot simply add a shareholder to its balance sheet; this constitutes a non-compliance with Section 56 of the Companies Act, 2013. The correct procedure involves the transferor and transferee signing the SH-4, followed by board approval and updating the Register of Members. Incorrectly added shareholders should be removed from the balance sheet with auditor assistance.

Company cannot add Shareholder to the balance sheet. Wrong concept.

It is a non-compliance of Section 56 of the Companies Act, 2013. The same shall be communicated to the auditors to remove the name from list of shareholders in Balance sheet.

Transferor and Transferee has to sign SH -4 for physical transfer of security ,company will only check the veracity of submission and either approve or reject it ,if its by gift deed then due course of law shall be followed , and new shareholder name will be entered in ROM in MGT-1 ,there is no concept of adding shareholders to balance sheet ,list of shareholders as on 31.03 is an annexure to MGT-7 ( annual return ) , Balance sheet represents capital of company in numerical value , subsequent inter se transfer will never affect that no unless otherwise capital base increased or reduced !
Share Transfers is a very important matter in the working of Companies. This practice is commonly seen in Private Limited but is very dangerous. You must prepare a proper MGT-1 since incorporation and work for shares transfers following the procedures like SH-4, Board Resolution, Share purchase agreement, Movement of funds

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