Share Transfer Procedure for Private Limited Company

Updated on January 31, 2026 06:44:52 AM

Share Transfer Procedures in a Pvt Ltd Company is a systematic way of transferring the ownership of shares from one owner to the other. Shares are the units of ownership in a company, and they can be bought, sold, or transferred. The shares in a private limited company are not traded publicly, it can only be sold or transferred to others.

The transfer of shares in a private limited company in India is governed by the Companies Act, 2013, and the rules and regulations prescribed by the Ministry of Corporate Affairs (MCA). In this blog post, we will discuss the procedure for share transfer in a private limited company.

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Share Transfer Restrictions

In a Private Limited Company , the transfer of shares is restricted to the company's Articles of Association (AOA). The AOA must be reviewed before any share transfer process begins.

Restrictions on Shareholders' Right to Transfer Shares

• Rights of Pre-emption: If a shareholder wants to sell their shares, the shares must first be offered to other existing members of the company at a price determined by the Directors or the Auditor of the Company. The method for valuing shares is prescribed in the Articles of Association. If no existing shareholder is interested, the shares may be freely transferred to an outsider.
• Powers of Directors to Refuse: As per the provisions mentioned in the Articles of Association, a director may refuse to transfer shares to another person. The director has the power to take decisions on share transfers in a Pvt Ltd Company.

Only the restrictions specified in the Articles of Association are legally binding, and any private agreements between shareholders are not binding on the company or the shareholders. The right to transfer shares cannot be completely prohibited or banned, as it is not permissible under the law.

How to Transfer Shares in a Private Limited Company

Here is how to transfer shares to a Private Limited Company in simple steps.

Step1: Get a Share Transfer Deed A Share Transfer Deed:

A Share Transfer Deed is the legal document which transfers the ownership of shares from the transferor (seller) to the transferee (buyer). It is signed by the parties concerned, duly stamped, as per Indian Stamp Act, 1899.

These are the details that would appear on the deed:

• Company name
• Number and class of shares to be transferred
• Names, addresses, and PAN of transferor and transferee
• Price or Consideration Given for the Transfer
• Date of signing

Step 2: Obtain No Objection Certificate

In case the resignation is required, the formal resignation letter should be penned by the director to the board or concerned individuals. This resignation should state the date of the resignation and the reason for the resignation if required.

A written request, along with the original share certificate, the Share Transfer Deed, and the required fee, needs to be submitted to the company by the transferor. Based on its satisfaction, the company verifies the documents and gives the NOC.

Step 3: Complete Transfer Documents

As mentioned, The Share Transfer Deed and the original share documents and NOC should be delivered to the company by the transferor within 60 days (about 2 months) from the date of executing the deed.

It checks the documents and then updates its records and issues a new share certificate in the name of the transferee.

Step 4: Board Approval

The board will examine the transfer request and decide of approval or disapproval according to the Statutes of Association and applicable law.

Upon approval, the transfer is entered into the minute book of the board, and the shareholders' register is accordingly updated.

Step 5: Pay Stamp Duty

Stamp duty is paid on the Share Transfer Deed at charges applicable for the respective state. This is required to be paid before submitting the documents for transfer of shares with the company

Step 6: Filing of Necessary Forms

The company must submit forms with the RoC regarding the transaction within 30 days from the date of its occurrence. The forms that need submission are Form SH-4, which is termed as share transfer, and Form MGT-7, which refers to an annual return.

Documents Required for Share Transfer in a Private Limited Company

Documents required for share transfer in a private limited company are:

• Share Transfer Deed: The main document executed by the parties
• Share Certificate:
• PAN Card: A copy of the PAN of the transferee is to be provided
• Board Resolution: The company's Board of Directors must approve such a transfer by resolution
• NOC: The company may demand an NOC from the transferor.
• Indemnity Bond: The transferor may be required to sign an indemnity bond to ensure protection against losses incurred due to the transfer.
• Stamp Duty: Pay the stamp duty on the transfer deed according to the rules laid down by the state.

It is always advisable to consult with a professional to ensure all papers are correct, and the transfer is done following the legal path. You can reach our team at Professional Utilities regarding share transfers and company incorporations.

Conclusion

Transfer of shares in a private limited company involves a number of steps and compliances. It is always advisable to seek the professional help of a Company Secretary or legal professional to keep up with compliances and avoid issues.