Equity & Capital Structuring
Transfer of Shares in a Private Limited Company (Form SH-4)
Transfer equity or preference shares in a Private Limited company compliantly under Section 56 of the Companies Act, 2013. We handle Securities Transfer Form SH-4 drafting, stamp duty franking (0.015%), board approval, and share certificate endorsements.
- Form SH-4 Securities Transfer Deed
- Stamp Duty Franking & Calculation (0.015%)
- Share Certificate Endorsement & MGT-1 Update
Equity Reallocation
The legal procedure for transferring shares in an unlisted Private Limited company
In a Private Limited company, shares are not freely traded on public stock exchanges. Under Section 2(68) of the Companies Act, 2013, the Articles of Association (AOA) inherently restrict the right to transfer shares, typically mandating board approval or offering pre-emptive rights to existing shareholders.
Transferring shares legally requires executing a Securities Transfer Form (Form SH-4), paying ad-valorem stamp duty of 0.015% of the total consideration value, obtaining formal approval from the Board of Directors, cancelling or endorsing the physical Share Certificate, and recording the entry in the Register of Members (Form MGT-1).
VIDURA provides end-to-end legal and secretarial assistance for share transfers—from valuation structuring and AOA pre-emption compliance to stamp duty franking and share certificate endorsements.
Use Cases
When is share transfer required?
Founding Equity Reallocation
Rebalancing share percentages among co-founders to reflect operational vesting or revised equity splits.
Angel & Investor Secondary Sales
Founders or early angel investors selling a portion of their equity to incoming venture capital funds.
Family Succession & Gifts
Transferring shares to family members or legal heirs via gift deeds or succession arrangements.
Exiting Shareholders / Buyouts
Clean exit of a departing partner or employee exercising equity liquidation agreements.
Scope
Complete share transfer facilitation services
AOA & Pre-Emption Review
Verifying that the proposed transfer complies with the restrictions and pre-emptive rights in the company's Articles.
Form SH-4 Execution
Drafting and executing the statutory Securities Transfer Form signed by both transferor and transferee.
Stamp Duty Payment (0.015%)
Calculating and affixing applicable stamp duty via physical revenue stamps or state e-stamping.
Board Resolution & Approval
Drafting formal meeting notice and board resolution approving the share transfer and entry in records.
Share Certificate Endorsement
Cancelling old share certificates, issuing endorsed certificates, or generating new certificates within 1 month.
Register of Members (MGT-1) Update
Updating the statutory Register of Members and preparing annual return data for the next MGT-7 filing.
Workflow
Transferring shares in 3 straightforward steps
Simple, organized, and guided at every step by our compliance desk.
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Step 1 — Notice of Intention & Valuation
Transferor issues notice of intent to transfer. Align on sale consideration (must meet minimum fair market value rules for tax compliance).
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Step 2 — Execute Form SH-4 & Stamp Duty
Both parties execute Form SH-4. Pay 0.015% stamp duty and submit SH-4 with the original Share Certificate to the company.
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Step 3 — Board Approval & Certificate Delivery
The Board approves the transfer within 60 days. The endorsed Share Certificate is delivered to the new shareholder.
Checklist
Documents required for share transfer
- Executed Form SH-4 (Securities Transfer Form) duly signed by transferor and transferee
- Original Share Certificate(s) corresponding to the shares being transferred
- PAN Card and identity proof of both transferor and transferee
- Proof of payment of stamp duty (0.015% of consideration value)
- Board Resolution approving the transfer of shares
- Valuation report by Registered Valuer / Merchant Banker (if required for tax/FEMA compliance)
Stamp Duty & Taxes
Stamp duty and tax considerations on share transfers
Unified Stamp Duty (0.015%)
Under the amended Indian Stamp Act, a uniform stamp duty of 0.015% of the total consideration value applies across all Indian states.
Income Tax Section 50CA & 56(2)(x)
Unlisted shares must not be transferred below Fair Market Value (FMV) computed under Rule 11UA, or deemed tax penalties apply.
FEMA FDI / FII Transfer (FC-TRS)
If shares are transferred between an Indian resident and a non-resident foreign entity, RBI Form FC-TRS must be filed within 60 days.
Why VIDURA
Airtight equity structuring without procedural defects
Tax-Safe Valuation Guidance
We ensure transfer prices comply with Rule 11UA to protect both buyer and seller from unexpected income tax notices.
Strict Section 56 Adherence
Form SH-4 executed and registered within the mandatory 60-day presentation limit to prevent invalidation.
Master Register Maintenance
Instant updating of the Register of Members (MGT-1) ensuring clean cap-table diligence for future funding rounds.
FAQ
Frequently Asked Questions About Share Transfers
What is Form SH-4?
Form SH-4 is the official Securities Transfer Form prescribed under Section 56 of the Companies Act, 2013 and Rule 11 of the Companies (Share Capital and Debentures) Rules, 2014. It is the mandatory legal instrument for transferring unlisted physical shares in India.
How much stamp duty is payable on share transfers?
Under the amended Indian Stamp Act, stamp duty on transfer of shares is 0.015% of the total consideration value of the shares being transferred. It must be paid via electronic stamp certificate or physical revenue stamp affixed on Form SH-4.
Within what timeframe must Form SH-4 be submitted to the company?
Under Section 56(1), the duly stamped and executed Form SH-4, along with the original share certificate, must be delivered to the company within 60 days from the date of execution.
Can the Board of Directors refuse to register a transfer of shares?
In a Private Limited company, the Board can refuse to register a transfer if it violates the transfer restrictions or pre-emptive rights in the Articles of Association (AOA). The company must send a notice of refusal within 30 days of receiving Form SH-4.
Structure Your Equity
Execute your company share transfer legally and smoothly.
Connect with VIDURA's corporate legal desk. We handle Form SH-4 drafting, stamp duty franking, and board approvals.