Transferring Shares in a Private Company
Shares in a private limited company can be transferred between existing shareholders or to new investors, subject to the restrictions in the company’s Articles of Association, such as pre-emption rights or board approval.
A transfer involves a transfer deed, payment of stamp duty, board approval and updating the register of members. Private companies other than small companies are also required to issue and transfer shares in dematerialised form, which adds depository steps.
Shares transferred correctly and on record
- Articles and shareholder agreements reviewed
- Transfer deed, stamp duty and approvals handled
- Registers and demat records updated
When Is a Share Transfer Needed?
- A co-founder is exiting the company
- An investor is buying existing shares
- Shares are being gifted or transferred within a family
- Shareholding is being restructured
Benefits of a Proper Transfer
Clear ownership
The buyer’s ownership is legally recognised.
Tax clarity
Transfer price and valuation are documented for tax purposes.
No disputes
Pre-emption and approval rules in your Articles are followed.
Investor-ready records
Registers and cap table stay accurate for due diligence.
Documents Required
- Share transfer deed (SH-4)
- Share certificates or demat details
- PAN of transferor and transferee
- Board resolution approving the transfer
- Valuation report where required
- Proof of stamp duty payment
Share Transfer Process
Review restrictions
We check the Articles and any shareholders’ agreement.
Valuation
We advise whether a valuation is needed for tax or FEMA purposes.
Transfer deed and stamp duty
SH-4 is executed and stamp duty paid.
Board approval
The board approves and registers the transfer.
Update records
Register of members, share certificates or demat accounts are updated.
Common Mistakes to Avoid
Share transfers are frequently delayed by these mistakes.
- Ignoring pre-emption rights – Existing shareholders may have the first right to buy.
- Unpaid or incorrect stamp duty – Transfers must be properly stamped.
- No valuation – Fair value matters for tax and for non-resident transfers.
- Physical transfer where demat is required – Many private companies must now use demat form.
- Registers not updated – Record the transfer in the register of members.
After the Transfer
Update registers
Register of members and beneficial ownership records.
Report where needed
FC-TRS for transfers with non-residents.
Tax reporting
Capital gains reported by the transferor.
Annual return
Changes reflected in MGT-7.
Why Choose Vaidam Consultancy for Share Transfer
Tax and FEMA aware
We flag valuation and reporting requirements, including for non-residents.
Clear quote upfront
You receive our fee and the government charges before any work begins.
One point of contact
A single consultant prepares the resolutions, files the forms and follows up with the ROC.
Cap table accuracy
Records stay clean for future investors.
Frequently Asked Questions
Yes. Stamp duty is payable on the transfer of shares at the rate prescribed under the Indian Stamp Act.
Private companies other than small companies are now required to issue and transfer securities only in dematerialised form, so shareholders may need demat accounts.
Often yes, to determine fair value for income tax purposes, and it is required for transfers between residents and non-residents under FEMA.
A share transfer itself is not filed with the ROC, but the changes are reflected in the company’s registers and in the next annual return.
No. The board approves transfers; the ROC sees the changes in the annual return.
It is the sale price less the cost of acquisition, taxed at short- or long-term rates depending on the holding period.