This excerpt from our expert guide, How to Run a Limited Company, outlines the steps you need to take when transferring shares in a limited company.
1. Get approval from the board
First of all, you need to ensure that the person to whom you wish to transfer the shares has the board’s approval.
You may need to watch out for pre-emption rights, which means another person (existing shareholder or anyone else) has the right to buy these shares.
Lawpack publishes an Approval and Register of Transfer of Shares template, which can help the directors to record their approval and the directors’ agreement to transfer the shares.
2. Sign a contract
Before you transfer shares in a limited company that you are selling, it would be as well to get the buyer and seller to sign an agreement as to what is to happen.
A suggested form of agreement (contract) – called Contract for Sale of Shares in a Private Company – is included on our guide How to Run a Limited Company.
If only you and the buyer are shareholders in the company, you can alternatively use our solicitor-approved template form Agreement to Sell & Buy Shares in Limited Company.
3. Get a share transfer form
Once the name of the transferee has been agreed, get a blank share transfer form. Lawpack provides a solicitor-approved stock transfer form template which includes expert guidance to help you complete the legal form.
4. Fill in the stock transfer form
Complete the stock transfer form as far as you (the company secretary) are able and send it to the person transferring the shares (the transferor), who should send it to the company secretary with their old share certificate for it to be cancelled.
5. Send the transfer form to the transferee
Send the transfer form to the transferee for them to complete their section before returning the form to the company secretary.
6. Get the form stamped
The stock transfer form should be stamped by the HMRC, normally at the rate of £0.05p per pound of the value being transferred.
The transfer may be exempt if no money is being paid for the shares.
It is the purchaser of the shares that has to pay the Stamp Duty.
The address for paying Stamp Duty is:
Birmingham Stamp Office
City Centre House
30 Union Street
Birmingham B2 4AR
Tel: 0845 603 0135
Find out more on transferring shares and paying Stamp Duty with our article Transferring shares in a limited company.
7. Note the transfer in the register of transfers
Once this has been completed, the company secretary should note the transfer in the register of transfers, issue the new share certificate in the name of the new owner and enter their details in the shareholders’ register.
8. Issue new shares
If the transferor is transferring only some of their shares, when you reach procedure 4. above, the company secretary will issue not one but two share certificates.
The company secretary will send one to the transferor for the balance of shares that they are retaining and one to the new holder for the shares they are acquiring.
9. Note the transfer in the next Annual Return
If the transferor is transferring their shares to more than one shareholder, separate transfer forms will be required and both will need to be stamped.
The transfer will need to be noted on the next Annual Return submitted to Companies House.