A transfer of shares is effected through an instrument of transfer in Form SH-4, executed by the transferor and the transferee. Section 56 governs the instrument, the delivery timeline and the company’s obligation to register the transfer.
The Instrument and Delivery
The instrument of transfer must be in SH-4, dated and executed by both parties. It must be delivered to the company within 60 days of execution, along with the share certificate or the letter of allotment. The 60-day delivery rule is mandatory, and a transfer instrument delivered after the 60-day period is vulnerable to rejection.
The Stamp Duty
The instrument must be stamped at 0.015% of the consideration, and the stamp duty is payable before the transfer is registered. An unstamped or under-stamped SH-4 cannot support the registration of the transfer; the company should verify the stamping before processing the transfer.
The Company’s Obligation
The company must register the transfer within one month of the receipt of the instrument, or refuse the registration within one month with reasons. A refusal must be communicated to the transferee and the transferor, and the transferee can appeal to the NCLT under Section 58. The company cannot refuse the transfer arbitrarily; the refusal must be based on a valid ground, such as a restriction in the articles or a defect in the instrument.
The Demat Transition
For a dematerialised share, the transfer is effected through the depository, and the SH-4 route does not apply. The physical transfer route is relevant for a company whose shares are not dematerialised, and for the period before the demat mandate takes effect.
Call to Action: We advise companies and shareholders on share-transfer documentation, stamp duty and refusal/appeal. For a share-transfer review, contact office@anujdesaiassociates.com, Ph No. 9619456656, Website https://anujdesaiassociates.com, LinkedIn linkedin.com/in/ca-anuj-desai-122547230.