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Difference Between Share Transfer and Share Transmission

Updated on : Oct 5th, 2023

The act of movement of an asset is termed as a transfer. The movement can be physical movement or the ownership of the title of the asset or both. For securities, this movement can be voluntary or operational by law. The transfer of shares is a voluntary act by the holder of shares and takes place by way of contract. Whereas, the transmission of shares takes place due to the operation of law that is on the death of the holder of shares or in an event where the holder becomes insolvent/lunatic.

Meaning of Transfer of Shares

Transfer of shares refers to the intentional transfer of title of the shares between the transferor (one who transfers) and the transferee (one who receives). The shares of a public company are freely transferable unless the company has a valid reason to disallow the same. The shares of a private limited company are not transferable subject to certain exceptions. A transfer deed is executed for the transfer of shares.

Meaning of Transmission of Shares

Transmission of shares takes place due to the operation of law that is when the holder is no more or has become lunatic or insolvent. It can also take place when the holder of shares is a company, and it has wound up. There is no transfer deed executed, and the transferee will be given the rights to the shares, and the transmission is recorded only when the transferee gives proof of entitlement to the shares. In case of the death of the holder the shares, it will be transferred to the legal representative and in case of insolvency to the official assignee. The following table illustrates the differences between the transfer of shares and transmission of shares:

Provisions Under Companies Act, 2013 and Companies (Share Capital & Debenture) Rules, 2014

As per Section 56 of the Companies Act, 2013 read with Rule 11 of Companies (Share Capital & Debenture) Rules, 2014

Transfer of shares

It will be affected only if a proper instrument of transfer, in Form SH -4, as given in sub-rule 1 of Rule 11 of Companies (Share Capital & Debenture) Rules 2014 duly stamped, dated, and is executed by or on behalf of the transferor and the transferee and specifies all the details like name, address, occupation if any of the transferee. It has to be delivered to the company by either parties within 60 days from the date of execution along with a certificate of securities or letter of allotment of securities as available. If the transferor makes an application for the transfer of partly paid shares, then the company gives notice of the application Form SH-5 as given in sub-rule 3 of Rule 11 of Companies (Share Capital & Debentures) Rules 2014, to the transferee and the transferee must give no objection to the transfer within 2 weeks from the receipt of the notice.

Transmission of shares

It will be affected when the application of transmission of shares along with relevant documents is valid. Execution of transfer deed is not required. The following are the relevant documents for the transmission of shares

  • Certified Copy of Death Certificate
  • Self Attested Copy of PAN
  • Succession certificate/ Probate of Will/Will/ Letter of Administration/ Court Decree
  • Specimen signature of successor

Time limit for delivery of a certificate in both cases

Every company must deliver the certificates of all securities transferred or transmitted within 1 month from the date of receipt of the instrument of transfer in case of transfer or intimation of transmission as applicable unless prohibited by any provision of law or any order of Court, Tribunal, or other authority.

Penalty in case of non-compliance

Where any default is made in complying with the above, the company shall be punishable with a fine not be less than Rs. 25,000 but which may extend to Rs. 5,00,000, and every officer of the company who is in default shall be punishable with a fine not be less than Rs.10,000 but which may extend to Rs.1,00,000. While the transfer of shares and transmission of shares intend a change in ownership of the title of the shares, the distinction lies in the fact that the transfer of shares is voluntary and initiated by the transferee or transferor while transmission of shares is operational by law and is initiated by the legal representative or receiver.

Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.

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Transfer of Shares

  • Transfer form or sale of shares agreement or any other instrument to evidence the transfer.
  • Cancel the previous share certificate of the previous share certificate of the previous owner.
  • Issue new share certificate and arrange for signature by two persons authorized by the board of directors.
  • Prepare resolution passed by the board of directors.
  • Update securities register.
  • Paying stamp duty on the transfer deed based on the consideration amount (0.25%) within two months from the month end of the month that the shares were transferred in.
  • Attach cancelled share certificate to transfer deed or transfer instrument and place on file.
  • To keep safely the new certificate.  If handed to shareholder, keep a copy of the signed share certificate on file.
  • Resolution in minute book.

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How to transfer shares?

Staying with the theme of financial markets, most of us know how to purchase shares. but what if you want to transfer their ownership let's know how to do it.

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What is the difference between transfer and transmission of shares?

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Transfer of Shares

Transfer of shares is a voluntary process of transferring the ownership rights in a company from one person to another.

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Introduction

Requirements, what is a transfer of shares.

Individuals or corporate bodies own and control a company by holding shares, collectively known as shareholders. These shares represent units of ownership and are transferable from one person to another, much like any movable property.

Shareholders voluntarily transfer shares by transferring the title from one party to another through a contract or arrangement involving two or more persons.

While shares of a Public Limited Company are freely transferable, shares of a Private Limited Company are subject to conditions or restrictions specified in the Articles of Association (AOA) of the company.

Advantages of Transfer of Shares

Flexibility in Ownership

Promoters, shareholders, and investors can buy and sell shares of a company through the process of share transfer. This mechanism offers greater flexibility in changing the ownership percentage in the company.

Exit Opportunity

In certain situations, some shareholders of the company may desire to exit by selling all or part of their shares, or the promoters/shareholders may wish to sell the entire company as a going concern. Share transfer offers an exit opportunity to the existing shareholders of the company.

Succession Planning

Existing shareholders can transfer the shares of a company to a family member or legal heirs as part of succession planning.

Minimum Requirements for Transfer of Shares

Share certificate

Share transfer deed (Form SH-04)

What is included in our Transfer of Shares package?

Consultation on Share transfer process

Verification of documents

Documentation of Share transfer such as Form SH-4, Board Resolution, Notice etc.

Share Certificates for shareholders

Share Transfer Procedure under Companies Act 2013

Collection of required Information and Documents

In the first step, we will collect the necessary information and documents according to the checklist. After verifying and confirming the provided documents and information, we will proceed to the next step.

Preparation of Share Transfer Documents

Once we have received all the necessary information and documents, we will proceed to prepare the required documents for share transfer, including Share transfer deed (Form SH-04), Notices, Resolutions, etc., on behalf of the applicant.

Execution of Share Transfer Documents

The transferor and transferee shall duly sign the documents prepared for share transfer, and then they shall pay the applicable stamp duty . Subsequently, the new shareholders will receive the revised share certificates, and their names will be recorded in the Register of Members.

Documents Required for Transfer of Shares

Certificate of incorporation

Memorandum of Association (MOA) and Articles of Association (AOA) of Company

Existing Shareholders list or Copy of Shareholder Register

Share certificate of Transferring Shareholders along with Name, Identity proof, mobile number, email id and address proof (Transferor)

Name, Identity proof, mobile number, email id and address proof of the purchasing shareholder (Transferee)

Receipt of consideration paid

Any other documents as may be required

Time Limit for Transfer of Shares

  • The respective party must deliver the duly executed share transfer deed (Form SH-4) to the company within 60 days from the date of execution.
  • If the company has no objection, it will record the share transfer and issue the share certificates within 1 month from the date of the transfer request.
  • However, the company reserves the right to refuse the transfer of shares on valid grounds within 30 days from the date of the transfer request. In such cases, the concerned party has the option to approach the Tribunal against the refusal.
  • In case of any non-compliance with the provisions of the law, both the company and every officer in default will be liable to a penalty of Rs. 50,000.

When is the share transfer required in a company?

The company may undergo share transfer process in cases when the shareholders want to change their shareholding pattern/structure, or when new investors or shareholders are inducted in the company.

How much time is required for the share transfer process?

The share transfer process takes approximately 7-8 days based on availability of the required documents and information.

Can I transfer a certain portion of my shares i.e., partial transfer ?

Yes, you can do partial transfer of shares.

Is the physical presence of shareholder required during the process?

The physical presence of shareholders may not be required during the process, however signature of transferring shareholders is required on the share transfer form.

Can I transfer the shares to a Foreign or Non-resident shareholder?

Yes, you can transfer the shares to a Foreign or Non-resident shareholder by complying with the FEMA Guidelines.

Can a minor person become a shareholder of a Company?

A minor can become a member/shareholder of a company only through gift and/or inheritance but he cannot enter into agreement to buy shares. Further, minor shall hold shares through his guardian and his guardian will act as a member on behalf of minor.

Can I transfer shares to a Company / LLP / Body Corporate?

Yes, you can transfer shares to any other Private Limited Company, Public Company, LLP, and Registered Society. However, Partnership firm cannot hold shares in any Company.

Is there any stamp duty to be paid on the share transfer deed?

Yes, stamp duty at the rate of 0.015% on the total value of consideration has to be paid on share transfer deed.

Is there any stamp duty to be paid on the share certificates?

Yes, stamp duty at the rate of 0.005% has to be paid on issue of share certificates.

What is the difference between a director and a shareholder?

A shareholder or member is an owner of a company who holds certain shares in the company and his name is entered in the register of members of the company. Whereas Director is a person who manages the day-to-day function of a business. Director and shareholder may or may not be the same person.

Can I transfer the shares held in Demat Form?

Yes, shares held in Dematerialised form can also be transferred to another person by following the due process as per law.

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Transfer of Shares

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Welcome to Compliance Calendar LLP: Your Trusted Partner for Transfer and Transmission of Shares. We understand that the transfer and transmission of shares is a critical aspect of corporate governance. Whether you are a company looking to facilitate the transfer of shares between shareholders or a shareholder undergoing a transmission process due to inheritance or other circumstances, our experienced team is here to assist you. As a leading legal and compliance firm, we specialize in handling secretarial assignments, including seamless and compliant transfer and transmission of shares.

WHY CHOOSE COMPLIANCE CALENDAR LLP?

Expertise and Experience: With years of experience in the legal and compliance industry, our dedicated team has extensive knowledge and expertise in managing the transfer and transmission of shares as we stay updated with the latest regulations and ensure that all procedures are carried out in accordance with applicable laws under the Companies Act, 2013 and related rules framed thereunder.

Comprehensive Solutions: Our Compliance Manager offer end-to-end solutions for the transfer and transmission of shares, providing a hassle-free experience for our clients. From document preparation and verification to liaising with regulatory authorities, we handle all aspects of the process, allowing you to focus on your core business activities.

Customized Approach: We understand that every company and shareholder have unique requirements. Our compliance team takes the time to understand your specific needs and tailors our services accordingly. Whether you require assistance with share transfers within your company or transmission of shares due to unforeseen circumstances, we provide personalized solutions that meet your individual needs.

Strict Compliance: Compliance is at the heart of everything we do at Compliance Calendar LLP. Our Compliance Manager ensure that all transfer and transmission procedures comply with the Companies Act, applicable rules, and regulations. Our meticulous approach ensures accuracy and minimizes the risk of legal complications or delays.

CCL TRANSFER AND TRANSMISSION SERVICES:

Share Transfer within Companies: We assist companies in facilitating the transfer of shares between existing shareholders. Our compliance team ensures that all necessary documents, such as share transfer deeds and share certificates, are prepared accurately and filed with the relevant authorities. We handle the entire process, from share transfer documentation to updating the company's records.

Transmission of Shares: In cases of transmission due to inheritance, death, or other circumstances, we guide shareholders through the legal requirements and procedures. We help prepare the necessary documents, including transmission applications, affidavits, and indemnity bonds, and assist in obtaining the required approvals and clearances from regulatory authorities.

Documentation and Compliance: Our compliance team takes care of the documentation and compliance requirements related to share transfers and transmissions. We ensure that all necessary forms, resolutions, and filings are completed accurately and submitted within the prescribed timelines.

Liaison with Regulatory Authorities: We act as a liaison between your company and regulatory authorities, such as the Registrar of Companies and stock exchanges. Our team handles all communication, coordination, and follow-up, ensuring a smooth and efficient process.

GET STARTED TODAY:

Don't let the complexities of share transfer and transmission hinder your company's growth or create unnecessary challenges for shareholders. Contact Compliance Calendar LLP today to benefit from our expertise and comprehensive solutions. Our dedicated team is ready to assist you in navigating the transfer and transmission process, ensuring compliance and peace of mind. Let us handle your secretarial assignments, while you focus on building a successful business.

LEGAL GENESIS ON TRANSFER/ TRANSMISSION OF SHARES

Transfer of ownership is possible by transfer of shareholding or Share by any person or group of persons in favour of another person or group of persons. In India as well as outside India, companies run by share capital funds either corporates or small business enterprises. Shares are defined under the Companies Act 2013 Section 2 (84) "share" means a share in the share capital of a company and includes stock. Shares are like any other goods. A purchaser gets no better title than the seller. Share Transfer is a statutory Right in India and regulated by its Article of Association.

WHAT IS SHARE TRANSFER?

Transfer of shares is a transaction resulting in a change of share ownership. A shareholder, whether in public or private company, has a property in his share which he has a right to dispose of, subject only to any express restriction which may be found in the articles of the company.

Are Shareholders and Members same or different?

Normally, it is considered that every shareholder is a member, and every member is a shareholder. However, it may be possible that a person may be a holder of share by transfer but would not become member until the transfer is registered in the books of company in his favour and his name is entered in the register of members (MGT-1) under the Companies Act 2013. In the same way, a member who has transferred his shares, though he does not hold any shares continues to be member of the company until the transfer is registered and his name is removed from the register of members maintained by the company under section 88 of the Companies Act, 2013.

A person holding equity shares of a company and whose name is entered in the records of a depository as a beneficial owner of the share is deemed to be a member of the company and when he desires to transfer the share to another person he can do so.

SHARES IN A PRIVATE LIMITED AND PUBLIC COMPANY

  • A private limited company is a limited company incorporated under the Companies Act, 2013 (or any one of its predecessor acts), with an article that restricts the transfer of its shares. With restrictions on transfer of shares, and limited number of members, a private limited company enjoys greater flexibility, less legal formalities, and the small shareholders body facilitates prompt decisions.
  • A public limited company must have at least seven members and its name end with “Limited” (abbreviated as – ‘Ltd.’). Subject to the provisions of the Companies Act, 2013, the shares issued by them are freely transferable and it can raise public deposits.

BASIC CONDITIONS BEFORE TRANSFER DEPEND UPON-

Two important elements or factor or conditions must be required before a person can acquire membership of a company-

  • agreement in writing to become a member; and
  • entry of the name of the person, in the register of members of the company

Documents Required for Transfer of Shares

When initiating the process of share transfer or share transmission, certain documents are typically required. While the specific documentation may vary depending on case to case basis and individual circumstances, here are some common documents often requested:

SHARE TRANSFER:

Share Transfer Deed: A share transfer deed is a legal document that facilitates the transfer of shares from the transferor (existing shareholder) to the transferee (new shareholder). The deed includes details such as the names of the transferor and transferee, the number and class of shares being transferred, and the consideration (if any) for the transfer.

Share Certificate: The original share certificate or a copy of it should be provided by the transferor, as it serves as evidence of ownership. This document will need to be endorsed or canceled upon the completion of the share transfer.

Letter of Request: A letter of request from the transferor to the company, formally stating their intention to transfer shares, is typically required. The letter should include details such as the names of the transferor and transferee, the number and class of shares to be transferred, and any specific instructions related to the transfer process.

Board Resolution: In the case of share transfer by a company, a board resolution is necessary. This resolution authorizes the transfer of shares and should be prepared and signed by the board of directors.

Identity and Address Proof: Both the transferor and transferee are usually required to provide copies of their identity and address proofs. These can include passport copies, driver's licenses, Aadhaar cards, or other government-issued identification documents.

Stamp Duty Payment: Stamp duty may be applicable on the share transfer, depending on the jurisdiction. Payment of the appropriate stamp duty should be made, and the stamped share transfer deed should be submitted along with the other documents.

SHARE TRANSMISSION:

Transmission Application: A transmission application is filed by the legal heirs or representatives of a deceased shareholder to request the transmission of shares. The application should include details such as the name of the deceased shareholder, their date of death, the relationship of the applicant to the deceased shareholder, and the requested transmission details.

Death Certificate: A certified copy of the death certificate of the deceased shareholder is required as proof of their demise. This document should be obtained from the relevant government authority.

Succession Certificate or Probate: Depending on the jurisdiction and the value of the shares being transmitted, a succession certificate or probate may be required. These legal documents establish the rights of the legal heirs or representatives and authorize them to claim the shares of the deceased shareholder.

Affidavit and Indemnity Bond: In some cases, an affidavit and indemnity bond may be required. These documents confirm the legal heirs' consent to the transmission and indemnify the company against any potential claims related to the transmission.

Identity and Address Proof: The legal heirs or representatives seeking the transmission of shares should provide copies of their identity and address proofs, similar to the requirements for share transfers.

Board Resolution or Shareholder Resolution: Depending on the company's internal procedures, a board resolution or shareholder resolution may be necessary to approve the transmission of shares.

Bonus Points: It is important to note that the specific documents and requirements may vary based on the jurisdiction and the unique circumstances surrounding the share transfer or transmission. It is advisable to consult with compliance professionals/ company secretaries at Compliance Calendar LLP to ensure compliance with the specific regulations applicable to your situation.

Legal Procedures of Transfer of Shares

Step 1 – Give a notice in writing to convey intention to transfer the share to the Company

Step 2 – Drafting & Execution of Transfer Deed and Shareholders Agreement

Step 3 – Payment of Stamp Duty on SH-4

Step 4 – Issue or Endorsement of Share Certificate (SH-1)

Step-5: Submit the documents to company

Step 6 – Hold Board meeting and pass the Resolution

Step-7: Make necessary entry in the Register of transfer in the record of the Company

Step 8 - Refusal or Acceptance of Transfer by Board

Step 9 – Reporting to ROC in form MGT-7 through Annual Compliance

Features & Benefits of Transfer of Shares

Section 56 of Companies Act, 2013 and Sub-Rule (1) Of Rule 11 of Companies (Share Capital And Debentures) Rules, 2014 deals with the share Transfer in the Company. A Company having share capital, other than the transfer between persons both of whose names are entered as holders of beneficial interest in the records of a depository. An instrument of transfer of securities held in physical form shall be file in Form No. SH-4. In case of Listed Company more provision needs to comply under-

  • SEBI Circular CIR/MIRSD/10/2013 dated October 28, 2013
  • NDSL/CDSL Bye Laws with respect to the transfer and transmission of shares

A company shall not register a transfer of partly paid shares, unless the company has given a notice in Form No. SH.5 to the transferee and the transferee has given no objection to the transfer within two weeks from the date of receipt of notice.

POST COMPLIANCE AFTER TRANSFER OF SHARES-

  • Every instrument with the date of its execution specified thereon shall be delivered to the company within sixty days from the date of such execution;
  • Where the instrument has been lost or the instrument of transfer has not been delivered within the prescribed period, the company may register the transfer on such terms as to indemnity as the Board may think fit;
  • Issue of Share Certificate or Endorsement of Shares; and
  • Entry in the Register of Transfer

MAINTENANCE OF REGISTER OF SHARE TRANSFER BY THE COMPANY

Every company should, from the date of its registration, maintain a register of share transfers and enter therein particulars of every share transferred. The register is not open for inspection by anyone. The register should be preserved permanently and should be kept in the custody of the secretary of the company, or any other person authorized by the Board for the purpose.

REGISTER OF SHARE TRANSFER SHOULD CONTAIN BELOW PARTICULARS:

  • Transfer serial number;
  • Date of lodgment of transfer deed;
  • Total number of shares to be transferred;
  • Consideration;
  • Transferor’s name and folio number;
  • Certificate number(s);
  • Distinctive numbers;
  • Transferee’s name and folio number, address, occupation, father’s/husband’s name;
  • Value of stamp duty paid;
  • Date of board / committee resolution approving transfer;
  • New certificate number, if any;
  • Date of dispatch of the certificate(s).

DUE DILIGENCE ON REGISTER OF TRANSFER WHETHER:

  • The company has maintained separate register of transfers for different classes of shares/debentures, and entered therein the particulars relating to the registration of transfer of shares/ debentures;
  • Transfer number as per the register of transfer and date of approval has been entered in the Share Transfer Deed(SH-4);
  • The Company has maintained a separate file of documents like Powers of Attorney, Probate, Letters of Administration and/or Succession Certificate, Resolution of companies or other bodies corporate authorising any particular person(s) to sign on its behalf that are registered with the company; and
  • Details of nomination forms have been noted if any.

Frequently Asked Questions (FAQs)

How much time will take in whole process for execution.

If all documents are available by both the parties (Transferor and Transferee), it can be completed within a week time. Board meeting time is not included which is subject to the board approval.

Without Execution of Transfer Deed (SH-4), is transfer Valid?

Where a resolution was passed expelling a member and authorizing the director to register the transfer of his shares without an instrument of transfer, the resolution was held to be invalid as being against the provisions of the Act [Madhava Ramachandra Kamath v. Canara Banking Corporation [1941] 11 Com Cases 78 (Mad)].

Transferability of Shares in the Indian Companies

The capital of a company is divided into parts, called shares. The shares are said to be movable property and subject to certain conditions as contained in the Companies Act and/or the Memorandum and Articles of Association of the company, the shares of a company are a transferable property. In the case of a private company, the Companies Act requires it to put certain restrictions on the transferability of shares. Every member owning fully paid shares is at liberty to dispose of them off according to his choice but subject to the Articles of Association of the company. In the case of a public company, the shares are freely transferable.

Is transfer of Share applicable to Government Company?

Provisions of Sub Section 1 of Section 56 (Transfer of Shares) are not applicable on Government Company in respect of Securities held by nominees of the Government. The requirement of execution of an instrument of transfer (SH-4) and delivering the same to the company has also been done away with in case of transfer of securities held between nominees of the Government.

What is the format of Share Certificate under Companies Act 2013?

As per Rule 5(2) of the Companies (Share Capital and Debentures) Rules, 2014 share certificate is required to be in Form SH-1. The rule prescribed that such format should be in Form SH-1 or as near thereto.

Who can into a Contract or be a member?

The person desirous of becoming a member of a company must have the legal capacity of entering into an agreement in accordance with the provisions of Section 11 of the Indian Contract Act, 1872. “Every person is competent to contract, who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject.” It is abundantly clear that no one can become a member unless he has agreed in writing to become a member of the company. In case of Share transfer by executing an instrument of transfer of shares as transferee can be a Member in the Company.

After death of any member, how shares can be transferred?

In case of death, transmission of shares needs to be done. The legal representative of a deceased member can transfer any security or interest owned by the deceased member, even though he himself is not a holder of the said security or interest. A succession certificate may also be required in this case.

What is the penal provision and punishment for non-compliance?

Where any default is made in complying with the provisions of sub-section (1) to (5), the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees. Any person who is found to be guilty of fraud, shall be punishable with imprisonment for a term which shall not be less than six months, but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud. Where fraud involves public interest, the term of imprisonment shall not be less than three years.

How much Stamp duty or fees need to pay on Share transfer Deed(SH-4)?

Transfer Deed should be duly stamped as per Indian Stamp Act, 1899 with stamp duty (currently 0.015%) paid on market value or consideration amount, whichever is higher. But, in some state’s duty is payable in form of franking of transfer deed.

Who is liable to pay duty on transfer of shares?

The Stamp duty is payable “by the person drawing, making or executing such instrument” SH-4.

Is MGT-14 required to be filed with the ROC for submission of documents or approval?

No. It is not a legal requirement in case of share transfer. However, Company optionally may file the form MGT-14 for their record of Transfer of share in ROC data.

In case of Transfer, Is Valuation of shares required?

As per the pre-emption clause in the Articles, shares are to be offered to other members at a price certified by the directors or auditors. If the valuer has in fact acted negligently and failed to account for all the necessary factors for arriving at the value of shares, the transferor has the right to institute legal proceedings against such valuer for any damages caused due to improper valuation of shares.

What are the compliances for Transfer of shares by a Person resident outside India

a. Non-Resident to Non-Resident (Sale / Gift): A person resident outside India (other than NRI and OCB) may transfer by way of sale or gift shares or convertible debentures to any person resident outside India (including NRIs but excluding OCBs).

What are the compliances for Transfer of shares from Resident to Person Resident outside India?

A person resident in India can transfer by way of sale, shares / convertible debentures (including transfer of subscriber's shares), of an Indian company under private arrangement to a person resident outside India, subject to the following along with pricing, reporting and other guidelines given in Annex - 3. a) where the transfer of shares requires the prior approval of the FIPB as per extant FDI policy provided that; i) the requisite FIPB approval has been obtained; and ii) the transfer of share adheres with the pricing guidelines and documentation requirements as specified by the Reserve Bank of India from time to time. b) where SEBI (SAST) guidelines are attracted subject to adherence with the pricing guidelines and documentation requirements as specified by the Reserve Bank of India from time to time. c) where the pricing guidelines under FEMA,1999 are not met provided that: i) the resultant FDI is in compliance with the extant FDI policy and FEMA regulations in terms of sectoral caps, conditionalities (such as minimum capitalization,etc.),reporting requirements, documentation, etc.; ii) The pricing for the transaction is compliant with specific/explicit , extant and relevant SEBI regulations(such as IPO, book building, block deals, delisting, open/ exit offer,substantial acquisition/SEBI(SAST); and iv) CA Certificate to the effect that compliance with relevant SEBI regulations as indicated above is attached to the Form FC-TRS to be filed with the AD bank. d) where the investee company is in the financial services sector 9 provided that: i). No Objection Certificates (NOCs) are obtained from the respective regulators/regulators of the investee company as well as the transferor and transferee entities and such NOCs are filed along with the Form FC-TRS with the AD bank; and ii). The FDI policy and FEMA Regulations in terms of sectoral caps, conditionalities(such as minimum capitalization, etc.), reporting requirements, documentation etc., are complied with. Note: The above general permission also covers transfer by a resident to a non-resident of shares / convertible debentures of an Indian company, engaged in an activity earlier covered under the Government Route but now falling under Automatic Route of the Reserve Bank, as well as transfer of shares by a non-resident to an Indian company under buyback and / or capital reduction scheme of the company. However, this general permission would not be available for the above transactions if they are not meeting the pricing guidelines or in case of transfer of shares / debentures by way of gift from a Resident to a Non-Resident / Non-Resident Indian

In which cases prior permission of the Reserve Bank in certain cases for acquisition / transfer of security if Shares are held or sale or purchase by Foreign resident or corporate required?

Transfer of shares or convertible debentures from residents to non-residents by way of sale requires prior approval of Reserve Bank in case where the non-resident acquirer proposes deferment of payment of the amount of consideration. Further, if approval is granted for the transaction, the same should be reported in Form FC-TRS to the AD Category – I bank, within 60 days from the date of receipt of the full and final amount of consideration.

What is the difference between Issue of Share Certificate and Endorsement of Share Certificate?

The issue of a share certificate refers to the initial issuance of a share certificate by a company to a shareholder, serving as proof of ownership. It establishes legal rights over the shares and includes details such as the shareholder's name, share class, and distinctive number. On the other hand, the endorsement of a share certificate involves transferring ownership from one shareholder to another by endorsing the back of the existing certificate. It signifies the intent to transfer ownership but does not result in the issuance of a new share certificate. Additional steps, such as executing a share transfer deed, are required to complete the transfer process and issue a new share certificate in the name of the new shareholder.

What details are required for the Share Certificate?

As per the format of the share certificate i.e. Form SH-1, the following details are required:

On the front of the Share Certificate

  • Name of the company;
  • Corporate identity number;
  • Address of the registered office;
  • Nominal value per share;
  • Amount paid-up per share;
  • Register Folio Number;
  • Certificate Number;
  • Name of the holders (including the joint holders);
  • Number of share held in words and in number;
  • Distinctive numbers from to;
  • Date of issue of share certificate;
  • Signatory of directors and secretary/any other authorized person;

On the reverse (Opposite side) of the Share Certificate

  • Name of the Transferor;
  • Name of the Transferee;
  • Number of shares;
  • Date of share transfer;
  • Signature of the authorized signatory

Can Compliance Calendar LLP help in the secretarial compliance?

Yes, we have a team of compliance managers who can access the information and help you make the right compliance to improve the corporate governance of your company. For any query, reach out to [email protected] or connect at 9988424211.

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