Transferring shares from a private limited company shareholder requires more than filling out and forwarding paperwork to Companies House. Precise procedures must be followed to transfer shares (an asset) from one person to another. This post details a share transfer process that works for most firms.
Determine Share Recipients.
Transferring shares usually requires finding a buyer. Companies’ articles of association or shareholder agreements may offer pre-emption rights over share transfers. If these are formed, a shareholder who wants to sell their shares must first make an offer to other shareholders, allowing them to claim a proportional part. They may not need to find a buyer themselves. Giving current shareholders the chance to buy shares—even if pre-emption rights are not in the articles of association—is often safer for the business than selling them to a third party.
Set a Price.
The price (or “consideration”) for transferring shares must be determined after finding a buyer. Few limits exist on the maximum share price, and selling shares for free is often possible. Shares can be traded for goods or services without monetary payment. A “non-cash consideration” is something other than money. A share purchase agreement may be signed after finding a seller and deciding on a price. Transfer details often determine a share purchase agreement’s viability.
Sign a Stock Transfer Form
The stock transfer form covers vital share transfer information:
- Business name
- The quantity, class and type of shares
- Volume of shares moved
- Seller/transferor name and address
- Buyer’s name and address as transferee
- The share price (if paid)
Stock transfer documents are signed and dated by the transferor. The buyer must sign and date a different stock transfer form if the shares are underpaid or partially paid.
Once completed, the stock transfer form must be reviewed by the company’s directors, who must approve or reject the transfer. This may require following protocols. If pre-emption rights existed, the director(s) would have to arrange for the procedure to be followed or ignored. They must also comply with all other business transfer restrictions. The director(s) will usually approve the transfer if all requirements are met.
Pay Stamp Duty.
Generally, the new shareholder must pay HMRC stamp duty at 0.5% of the sale price if the share transfer is projected to exceed £1,000. If stamp duty applies, the stock transfer form and payment must be sent to HMRC within 30 days. If HMRC believes stamp duty was paid correctly, they will confirm in writing.
Issue Share Certificates and Update Membership Registration.
After the paperwork is completed, approved by the director(s), and stamp duty is dealt with, the company’s membership register can record the share transfer. This is significant because the transfer’s legal effect depends on its registration into the members’ register. The transferee becomes the legal owner of the shares once their name appears in the register; thus, this step should be completed immediately.
The seller’s share certificate should be delivered to the business for cancellation. The company usually prints “CANCELLED” on old copies and certifications. The transferee receives a share certificate. Two directors, one director and one secretary, or one director and one witness, must sign the share certificate for the firm.
Declare confirmation.
Typically, Companies House receives a confirmation statement of the transfer as the final step. While not mandatory, updating the public record soon after a transfer is an excellent practice. This means that the public record shows the present shareholders.
Contact Medallion Guarantee on 0203 985 9551.