Avil Rakshith Salins — ACS A48442, Practising Company SecretarySalins & Co.
E11

Engagement

Share Transfer in a Private Limited Company

Last reviewed 26 October 2026

Moving shares between shareholders, from the SH-4 to the updated register.

In short

Physical shares of a private limited company are transferred on Form SH-4, stamped and signed by both parties, and lodged with the company within 60 days of signing, with the share certificate. The board approves the transfer and the company delivers the certificate within one month. In a private company that is not a small company, the shares must now be dematerialised before they are transferred.

Overview

A private company's articles restrict the right to transfer its shares (section 2(68) of the Companies Act, 2013), so the first step is to check the articles, and any shareholders' agreement, for a right of first refusal, board approval or other condition. Shares held in physical form are then transferred on an instrument of transfer in Form SH-4 (rule 11 of the Companies (Share Capital and Debentures) Rules, 2014), duly stamped, dated and executed by or on behalf of both the transferor and the transferee. Either party delivers it to the company within 60 days of execution, with the share certificate (section 56(1)). The board approves the transfer, the register of members is updated, and the company delivers the certificate within one month of receiving the instrument (section 56(4)(c)).

A private company that is not a small company (or a government company) must also have its securities in dematerialised form, under rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014, inserted by G.S.R. 802(E) dated 27 October 2023. A holder who wishes to transfer must get the shares dematerialised before the transfer (rule 9B(4)(a)). For a company that was not a small company on 31 March 2023, the deadline was extended to 30 June 2025 (G.S.R. 131(E) dated 12 February 2025); a company that crosses the limits later has 18 months from the end of that financial year. Small companies, now those with paid-up capital up to ₹10 crore and turnover up to ₹100 crore (G.S.R. 880(E), from 1 December 2025), remain outside the rule. A holding or subsidiary company is never a small company.

Stamp duty on a transfer of shares is 0.015% of the consideration, under the Indian Stamp Act, 1899 as amended by the Finance Act, 2019 with effect from 1 July 2020. Where one party is a non-resident, a resident selling to a non-resident cannot sell below fair value, and a non-resident selling to a resident cannot sell above it. The resident party reports the transfer in Form FC-TRS within 60 days of the transfer or of the receipt or remittance of the consideration, whichever is earlier (regulation 4(3), FEMA 395/2019-RB). The transfer needs no separate ROC form. It is reflected in the next annual return, and where it changes a significant beneficial owner, the company files BEN-2 within 30 days of receiving the declaration in BEN-1.

Key Deliverables

  • Review of the articles and any shareholders' agreement for transfer restrictions
  • Drafting of Form SH-4 and coordination of stamping
  • Board resolution approving the transfer and update of the register of members
  • Endorsement or issue of share certificates within one month
  • Rule 9B dematerialisation check, and coordination with the depository participant and RTA
  • FC-TRS coordination for resident and non-resident transfers, and BEN-1 / BEN-2 where control changes

Documents & E-Forms

  • SH-4
  • Sec. 56
  • Rule 9B
  • FC-TRS
  • BEN-2

When to Engage

Before the price and the date of signing are fixed, since the SH-4 must reach the company within 60 days of execution and, in a company covered by rule 9B, the shares must be dematerialised before the transfer.

Typical turnaround: Scoped in the engagement letter.

Related: Change of Directors in a Private Limited Company

Frequently Asked

About this engagement

0.015% of the consideration, under the Indian Stamp Act, 1899 as amended by the Finance Act, 2019 with effect from 1 July 2020. The SH-4 must be duly stamped before it is lodged with the company.

The proviso to section 56(1) allows the board to register the transfer where the instrument was not delivered within the period, or has been lost, on such terms as to indemnity as it thinks fit.

Yes, where its articles allow. A private company that refuses must send a notice of refusal, with reasons, to the transferor and the transferee within 30 days of receiving the instrument (section 58(1)). The transferee can appeal to the NCLT within 30 days of receiving the notice, or within 60 days of delivering the instrument if no notice was sent (section 58(3)).

Not for the transfer itself. The change appears in the next annual return in MGT-7 or MGT-7A. If the transfer changes a significant beneficial owner, the owner declares it in BEN-1 and the company files BEN-2 within 30 days of receiving that declaration.

In Form FC-TRS, filed by the resident party within 60 days of the transfer or of the receipt or remittance of funds, whichever is earlier. The price must follow the FEMA pricing guidelines, based on a fair value certified by a Chartered Accountant, a SEBI-registered merchant banker or a practising cost accountant.

The shares pass by transmission, not transfer, so no SH-4 is needed (section 56(2)). The company registers the nominee or the legal representative on the documents its articles require, and delivers the certificate within one month of receiving the intimation (section 56(4)(c)).

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