Share Transfer - Procedure Involved, Time Limits And Penalties

Author : nancyahuja2414
Publish Date : 2021-04-20 05:18:56
Share Transfer - Procedure Involved, Time Limits And Penalties

Shares are transferable and categorised as movable property. Transfer of shares refers to the voluntary hand over of the rights by the way of selling and transmission means the change of ownership of shares by the way of inheritance, succession, or bankruptcy. An investor can transfer his shares of a listed company from his one demat account to his other demat.

Before transfer your shares, you need to know, how to transfer shares from one demat account to another. The transfer and transmission of shares are regulated under Section 56, 2013 Companies Act, 2013. Private ltd companies are restricted to their Articles of Association (AOA) to transfer shares. They cannot invite the public to get their shares.

Share Transfer of a Private Ltd Company 

The transferor needs to issue a notice mentioning the reason for transferring the share to the company. The company then circulates the information about the availability of shares and the time limit to purchase shares on transfer. In case, no members want to purchase the shares, these can be transferred to an outsider.

The procedure to transfer the shares in a Private Limited company are mentioned below:

Step 1: Obtain the share transfer deed in the form of SH-4.

Step 2: Execute the deed both by the Transferor and Transferee. Details of both parties should be mentioned.

Step 3: Stamp the deed.

Step 4: Get the deed signed by the witness.

Step 5: Send the deed along with the allotment letter to the Company.

Step 6: After checking the deed and documents, the company will present it in the board meeting to pass the resolution and new share certificates will be registered in the name of the new owner. The shares certificates will be issued within one month after passing the resolution.

Share transfer of listed companies 

Shares of listed companies can be traded i.e. purchased and sold at the stock exchanges by the general public. Small investors can purchase the shares of a company through an initial public offering (IPO) also. When a Pvt company goes public and issues its shares to the general public for the first time, the process is known as IPO. The general public can apply for IPO issues. Investors need an online Demat account to hold these stocks electronically as it is mandatory for trading online.

Sometimes investors wants to maintain their investment portfolio and trading portfolio separately. Therefore, they need multiple demat accounts. They can hold financial securities to be sold in short term in a demat account and long term financial securities in another demat account.

How to transfer shares from one demat account to another

The shares can be transferred from one demat to another into ways - Online Mode and Offline Mode. 

Online Mode:

Following are the steps for online share transfer from one demat account to another demat account:

Step 1: Register at any of the Central Depositories official website - the CDSL (Central Depository Services India Limited) and the NSDL (National Securities Depository Limited). 

  • Registration at the CDSL's for their EASIEST Facility:

  1. Go to the official page 
  2. Select the ‘Easiest Registration’. You will get the share transfer request form. 
  3. You need to fill the form with your demat account number, Broker ID, Client ID and other personal details as well. 
  4. You will receive an OTP for verification.

- Registration at NSDL for their ‘Speed-e’ Facility:

  1. Go to the official website 
  2. Select the option New User Registration. 
  3. Select the option Speed-e and get registered. Fill it with all the required details.

Step 2: Submit the duly filled-in registration form in-person to your stockbroker. 

Step 3: Your stockbroker will submit your request to the central depository. Once the verification process is completed, you are authorized to operate your SPEED-e or EASIEST account in order to transfer shares. 

Offline Mode 

You need to follow these steps to transfer shares manually.

Step 1: Go to your stockbroker to get a Debit Instruction Slip (DIS).

Step 2: Fill in the correct ISIN number of the shares to be transferred from demat to another. 

Step 3: Select the transfer mode in the DIS. 

  • Intra-Depository - when the existing stockbroker and the new stockbroker both are registered with the same depository. 
  • Inter-Depository transfer - when both stockbrokers are registered with different depositories.

Step 4: Submit the filled-in DIS to your existing stockbroker. You will receive the acknowledgment receipt. The share transfer process will take 3 to 5 days. 

Thus, with the appropriate information, the share transfer process is an easy process.

Category : business

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