How to Transfer Shares of Private Limited Company

Private limited companies are closely held companies with less than 200 members. The transfer of share of a private limited company are governed by the provision of the Companies Act, 2013. According to the Companies Act of 2013, a private limited company cannot invite the public to subscribe to any securities of the company. Also, a private company enjoys a special right of restricting the transferability of shares, which enables them to maintain ownership. However, the restriction on transfer of shares in a private company is not applicable in certain cases such as, on the right of a member of the company to transfer his share to his legal representative & in event of death of a shareholder, the transfer of share to his legal heir cannot be restricted. It is also to be noted that the restriction cannot be made as prohibition but only by the Articles of Association (AoA) of the company. Transferability of shares in private limited companies make convenient for shareholders to change their stake amongst the members. Therefore, private limited companies are preferred by entrepreneurs over the other business model. Therefore, if one want's to transfer shares which hold in private limited companies, then one have to go through the following steps:

Steps for Transferring Shares of Private Limited Company

Obtain a share transfer deed
The share transfer deed must be executed by the transferor and transferee or their agents
Share transfer deed must bear stamps as per the provisions of Indian Stamps Act and Stamp Duty Notification
Witness to sign the share transfer deed with name and permanent address
Attaching the share certificate with the share transfer deed and deliver it to the company
If all the documents are found to be in prescribed order, the board of director shall register the transfer by passing a resolution. Finally, share transfer details should be given to the registrars of companies in annual return of the company in form MGT-7.
However, on refusal of such transfer of shares, a notice is to be served to the transferee within thirty days of receipt of such share deed.

What happen if a company refuses to register transfer of shares?

If a private limited company refuses to register the transfer of or the transmission of the right to shares. Then company shall within a period of thirty days from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, send notice of the refusal to the transferor and the transferee giving reasons for such refusal. Then, the transferee may appeal to the Tribunal against the refusal within a period of thirty days from the date of receipt of the notice or in case of notice has been sent by the company, within a period of sixty days from the date on which the instrument of transfer or the intimation of transmission.

Transfer of Partly Paid Up 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.The transferee has given no objection to the transfer within two weeks from the date of receipt of notice.

Talk to an IndiaFilings Expert about Share Transfer in a Private Limited Company.

Back to Learn

Frequently Asked Questions

Common questions about Transfer Shares of Private Limited Company in India.

To transfer shares of a private limited company, you need to obtain a share transfer deed, execute it with the transferor and transferee's signatures, pay applicable stamp duty, get it witnessed, attach the share certificate, and submit it to the company for registration by the board of directors.

Yes, a private limited company enjoys the special right to restrict the transferability of shares through provisions in its Articles of Association (AoA). However, this restriction cannot be a complete prohibition, and exceptions apply in cases like transfer to legal representatives or heirs.

If a private limited company refuses to register the transfer of shares, it must send a notice to the transferor and transferee within 30 days, stating the reasons for refusal. The transferee can then appeal to the Tribunal against the refusal within 30-60 days of receiving the notice.

A company cannot register the transfer of partly paid-up shares unless it has given a notice in Form No. SH.5 to the transferee, and the transferee has provided no objection to the transfer within two weeks of receiving the notice.

The documents required for transferring shares of a private limited company include a share transfer deed, share certificate, stamp duty payment evidence, witness signatures, and any other documents as per the company's Articles of Association.

The article does not specify a timeline for a private limited company to register the transfer of shares once all required documents are submitted. However, it mentions that the company must send a notice of refusal within 30 days if it refuses to register the transfer.

No, the restriction on the transfer of shares in a private company is not applicable in the event of a shareholder's death. The transfer of shares to the legal heirs of a deceased shareholder cannot be restricted.

The purpose of restricting the transfer of shares in a private limited company is to enable the company to maintain its ownership and control among a closely-held group of members or shareholders.

The share transfer deed can be executed by the transferor and transferee themselves or by their authorized agents or representatives.

The board of directors of a private limited company is responsible for registering the transfer of shares by passing a resolution, after ensuring that all required documents are in order and as per the company's Articles of Association.