Share Transfer

Overview

A share transfer is a voluntary handing over of shares from a member (the transferor) to another person (the transferee) by sale, gift or agreement. It is different from transmission, which happens by operation of law on death, insolvency or similar events. The rules sit in the Companies Act, 2013 (mainly Section 56 and Section 58), the company's Articles of Association (AOA) and, where applicable, the Indian Stamp Act and the foreign exchange rules.

Who needs it

• A founder or investor selling a stake to another person.
• Family members gifting or passing shares.
• A company onboarding a new shareholder through purchase of existing shares rather than a fresh issue.
• Legal heirs of a deceased shareholder (transmission rather than transfer).

What Zenith does

We listen to the deal, review the AOA and any shareholders agreement for pre-emption, board consent and lock-in rules, then share an assignment-specific checklist. Your relationship manager prepares the SH-4 transfer deed, board resolution, updated registers and new share certificates, and coordinates stamp duty. Tax and valuation questions are flagged and routed to the right professional. Timelines depend on completeness, complexity and authority processing.

Eligibility and key rules

• Shares are freely transferable unless the AOA restricts them; private companies usually have restrictions.
• A proper instrument of transfer in Form SH-4 is required, duly stamped and signed by both parties.
• The company should not register a transfer without that instrument, which must reach it within 60 days of execution.
• Where only the transferor applies for partly paid shares, the company gives notice and waits for the transferee's no-objection.
• If the company must hold securities in demat form, the transfer happens through the depository instead of SH-4.
• A transfer to a non-resident or by a non-resident carries foreign exchange pricing and reporting rules.

Documents required

• Original share certificate (for physical shares).
• Duly stamped and signed SH-4.
• Board resolution approving the transfer.
• PAN and address proof of transferor and transferee.
• AOA, plus any no-objection or pre-emption waiver the AOA requires.
• Valuation report where a fair value is needed.
• Death certificate and legal heir proof for transmission cases.

Process and timeline

1. Check the AOA and any shareholders agreement for restrictions.
2. Offer shares to existing members first, if pre-emption applies.
3. Execute and stamp SH-4; hand it with the certificate to the company.
4. Board approves the transfer (or gives reasons if refusing).
5. Update the register of members and the transfer register.
6. Issue the new share certificate within one month of receiving the instrument.
7. Reflect the new holding in the next annual return.

Timelines depend on completeness, complexity and authority processing, and on any approvals the AOA requires.

Government fees, penalties and due dates

• Stamp duty is payable on the transfer deed under the Indian Stamp Act. The sources read give different rates, so Zenith confirms the applicable rate and state rules before execution.
• SH-4 must be delivered to the company within 60 days of execution.
• New certificates are due within one month of receiving the instrument of transfer.
• Failure to deliver certificates on time can attract a penalty on the company of ₹25,000 to ₹5,00,000 and on officers in default of ₹10,000 to ₹1,00,000.

Amounts and dates above reflect public sources read in October 2026 and change with notifications, so Zenith confirms the current figures in your quotation.

Common mistakes

• Signing SH-4 without paying stamp duty.
• Ignoring pre-emption rights or board consent in the AOA.
• Moving shares by simple email or agreement without a registered transfer.
• Not updating the register of members.
• Overlooking foreign exchange rules when one party is a non-resident.

FAQs