One of the most important characteristics of a company is that its shares are transferable. Section 44 of the Companies Act, 2013 states that the shares or debentures or other interest of any member in a company shall be movable property, transferable in the manner provided by the articles of the company.

  • As per section 58(2), the securities or other interest of any member in a public company shall be freely transferable.
  • Proviso to section 58(2) provides that any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract.
  • In terms of Section 2(68), a private company is required to restrict the right to transfer its shares by its articles.
  • Section 56 of the Companies Act deals with transfer and transmission of securities.

What is Transfer of Shares?

Transfer of shares means the transfer of ownership of the shares from one person to another. Transfer of shares is affected by removing the name of the existing shareholder from the register of members and by inserting the name of the transferee in place of the transferor in the register of members. Shares of a public company are freely transferable whereas there are certain restrictions on the transfer of shares of a private company.

Checklist of Transfer of Shares

  • Primarily check Articles of Association of the Company for the stringent conditions on transfer of shares.


  • A Company shall not register a transfer of securities  unless a proper instrument of transfer, in SH-4, duly stamped, dated and executed by or on behalf of the transferor and the transferee and specifying the name, address and occupation, if any, of the transferee has been delivered to the company by the transferor or the transferee within a period of sixty days from the date of execution, along with the certificate relating to the securities, or if no such certificate is in existence, along with the letter of allotment of securities.


  • In case instrument of transfer 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.


  • Where an application is made by the transferor alone and relates to partly paid shares, the transfer shall not be registered, unless the company gives the notice of the application, in Form No. SH-5, to the transferee and the transferee gives no objection to the transfer within two weeks from the receipt of notice.


  • After scrutiny of transfer deed, if all the documents are in proper order than the Company register the transfer and issue share certificates with in 1 month from the date of receipt of the instrument of transfer.


  • The transfer of any security or other interest of a deceased person in a company made by his legal representative shall, even if the legal representative is not a holder thereof, be valid as if he had been the holder at the time of the execution of the instrument of transfer.

Procedure of Transfer of Shares

S.No.Compliance ResponsibilityCompliancesDocuments ExecutionTimeline
1Transferor and TransfereeExecution of Share Transfer deedSH-4
2Transferor and TransfereeShare Transfer deed shall be dated
3Transferor and TransfereeStamp duty affixed on Share Transfer deed at the rate of 0.25% of consideration and stamps shall be cancelled
4Transferor and TransfereeShare transfer deed shall be signed by Transferor, Witness and Transferee
5TransfereePayment for Share Transfer
6Transferor or TransfereeDuly executed Share transfer deed in form SH-4 with Share Certificate along with request of splitting if any is required to delivered to the Company1. SH-4
2. Existing Share Certificate
3. Proof of receipt of Consideration of Transfer of Shares
60 days
7CompanyCheck Articles of Association for Compliance of provisions regarding transfer
8CompanyTo call Board Meeting for taking up the matter of transfer of Shares1. Notice of Board Meeting
2. Agenda of Board Meeting
9CompanyBoard Meeting1. Certified true copy of Resolution for Transfer of Shares, issue of Share Certificate and Splitting of Shares
2. Minutes of Board Meeting
9 days
10CompanyIssue of Share CertificatesExisting Certificate/New Certificate1 month from receipt of Transfer deed
11CompanyEntry in Register of Share Transfers and Members



  1. Transfer of shares from Non-Resident Indian to Non-Resident:-


Transfer of shares from Non-Resident Indian to Non-Resident requires the prior approval of the RBI.




  1. Transfer of shares from Non-Resident Indian to Resident:-


      Documentation required

  1. Consent letter duly signed by the seller and buyer or their duly appointed agent indicating the details of transfer, ie, number of shares to be transferred, the name of the investee company whose shares are being transferred and the price at which shares are being transferred.
  2. Where the consent letter has been signed by their appointed agent the Power of attorney Document authorizing the agent to purchase/sell shares by the seller/buyer. In case there is no formal Sale Agreement, letters exchanged to this effect may be kept on record.
  • If the sellers are NRIs, the copies of RBI approvals evidencing the shares held by them on repatriation /non- repatriation basis. The sale proceeds shall be credited to NRE/NRO account, as applicable.
  1. Certificate indicating fair values of shares from a Chartered Accountant.
  2. No objection/ Tax Clearance certificate from Income Tax authority/ Chartered Accountant.
  3. Undertaking from the buyer to the effect that the pricing Guidelines have been adhered to.


        Reporting of transfer

  • (a) Reporting of transfer of shares between residents and non-residents is to me made in Form FC-TRS.
  • (b) The Form FC-TRS should be submitted to the AD category-I Bank, within 60 days from the date of receipt of the amount of consideration.
  • (c) The onus of submission of the Form FC-TRS within the given timeframe would be on the investee company.

PENALTY:- Where any default is made in complying with the provisions of Companies Act, 2013, 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.