Share Transfer in a Private Limited Company: SH-4 Procedure, Stamp Duty and Demat Rule
Short answer: In a private limited company, physical shares are transferred by a share transfer deed in Form SH-4. The deed is stamped, dated and signed by the seller (transferor) and the buyer (transferee), then delivered to the company with the share certificate within 60 days of signing. The board approves the transfer under the articles, and the company delivers the endorsed or new certificate within one month (section 56, Companies Act, 2013; rule 11, Companies (Share Capital and Debentures) Rules, 2014). If the company is not a small company, the shares must first be dematerialised, and the transfer then happens through the depository instead of on SH-4.
Physical or demat: which route applies
| Your company | How shares are transferred | Basis |
|---|---|---|
| Small company (or a private company not yet covered by the demat rule) | Physical transfer on Form SH-4, lodged with the company | Section 56(1); rule 11(1) |
| Private company that is not a small company | The seller must dematerialise the shares before the transfer; the transfer is then made between demat accounts | Rule 9B(4)(a), Companies (Prospectus and Allotment of Securities) Rules, 2014 |
Rule 9B applies to a private company that, on the last day of a financial year ending on or after 31 March 2023, is not a small company under its audited accounts. It must comply within 18 months of that year's end; companies that were not small on 31 March 2023 had until 30 June 2025. Government companies are excluded, and producer companies get five years. To check whether your company is small, see the small company definition.
Step-by-step: physical share transfer on SH-4
- Check the articles. A private company's articles must restrict the right to transfer shares (section 2(68)). Many articles give existing shareholders a right of first offer or require board approval, so follow that procedure before signing anything.
- Agree the price. Get the fair value worked out, because a transfer below fair market value can have income-tax consequences for both buyer and seller. If one side is a non-resident, FEMA pricing and reporting rules also apply.
- Execute Form SH-4. Fill in the company, the shares (number, distinctive numbers, certificate number) and the consideration. The transferor and transferee sign it in front of a witness, and the date of execution is written on it.
- Pay stamp duty. Under the Indian Stamp Act, 1899, as amended by the Finance Act, 2019 with effect from 1 July 2020, a transfer of shares is charged at 0.015% of the consideration. The SH-4 must be duly stamped (section 56(1)).
- Lodge it with the company within 60 days of execution, together with the share certificate. If it arrives late, or the deed is lost, the board can still register the transfer on terms of indemnity (proviso to section 56(1)).
- Board approval and registration. The board approves the transfer by resolution, and the company enters the transferee in its register of members.
- Certificate within one month. The company endorses the existing certificate or issues a new one within one month of receiving the transfer deed (section 56(4)(c)).
Documents checklist
- Form SH-4, stamped and signed by both parties and a witness
- Original share certificate
- Board resolution approving the transfer
- PAN and address of the transferee, for the register of members
- Proof of payment of the consideration
- Any consent or waiver required by the articles, such as a waiver of the right of first offer by other shareholders
Filings after the transfer
- No separate MCA form is filed for a share transfer in a private company. The change appears in the company's next annual return; see the MGT-7A filing guide.
- Significant beneficial owner. If the transfer gives someone 10% or more, the significant beneficial owner rules apply: the person declares in Form BEN-1 and the company files Form BEN-2.
- Partly paid shares. The company must first give notice to the transferee in Form SH-5, and the transferee must not object within two weeks (rule 11(3)).
The full text of the transfer provisions is in our explainer of section 56 of the Companies Act and the Share Capital and Debentures Rules.