9 easy steps to making a share transfer

Lawpack on March 27, 2020

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
Ninth floor
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.

Further information

 

External information

Transferring shares in a limited company

Lawpack on March 27, 2020

If you need to transfer shares from one limited company shareholder to another, you will need to complete a stock transfer form, in accordance with the Stock Transfer Act 1963.

The stock transfer form must be signed by both of the parties involved in the transfer and a copy should be kept on record.

Lawpack provides a stock transfer form template that has been drafted by solicitors for straightforward completion and contains all the information required.

What is a share transfer?

A share transfer, or a stock transfer, allows you to shift the legal ownership of company shares to someone else.

There are a number of reasons why you may need to transfer shares. For example, one shareholder may be leaving the company, while another may retire.

Similarly, in the event of a shareholder’s death, their stock holdings may be transferred to another person.

How is a share transfer made?

A share transfer is made by means of a stock transfer form, which can be downloaded through Lawpack’s website.

Typically, the current shareholder will fill in the form, providing details of the shares to be transferred.

Once it is signed, it will be handed over, together with a share certificate to the transferee. Payment, if necessary, will be made at this point.

The transferee will then complete the relevant sections of the stock transfer form, including any information required on tax.

Do I need to pay stamp duty?

This depends on the circumstances involved in the transaction. If no money or value is paid for the transfer, then you will not be liable for stamp duty.

If money or value is paid, then stamp duty will apply, but only if the transfer is valued at more than £1,000.

This applies to any legal forms used on or after March 13th 2008.

If the value falls below this, then an exemption certificate must be completed.

Transfers valued above £1,000 are subject to stamp duty at 0.5 per cent of the price paid for the shares. This will be rounded up to the nearest £5.

So if you were to transfer shares for £10,000, stamp duty of £50 would need to be paid (£10,000 x 0.5 per cent = £50).

Stamp duty on share transfers has a minimum value of £5. So if the amount payable is less than this amount, then you will still have to pay £5.

What happens next?

If stamp duty is to be paid, then the stock transfer form must be sent along with the correct fee to HM Revenue and Customs, where it will be stamped.

This fee must be sent in the form of a cheque or international money order made payable to HM Revenue and Customs.

The completed and stamped form and the share certificate must then be forwarded by the transferee to the transferor. If no stamp duty is payable, the stock transfer form will be sent straight to the transferor.

Upon receipt of the documents, the company whose shares are being transferred will cancel the old share certificate and update its register of members.

It will also record the details of the transfer and issue a new certificate to the transferee within two months of the date the transfer was lodged.

There is no need to send a form or give notice to Companies House, as this will be included in the next annual return filed for the firm.

Circumstances in which a stock transfer may take place

As mentioned, a stock transfer may take place in a number of circumstances.

If a shareholder dies, their shares and the associated rights must be given to a personal representative or executor.

This individual will either register themselves as a member or transfer the shares directly to the beneficiary named in the deceased’s will.

Similarly, if a shareholder is declared bankrupt, their shares will be moved to a trustee who will again register as a member or sell on the shares directly.

If a shareholder leaves the company or retires, an agreement on what to do with their shares must be reached.

Shares can be bought back by the company and redistributed among the remaining shareholders, or they could be transferred to a single individual.

What information should a stock transfer form contain?

A stock transfer form from Lawpack will contain the following information:

  • Consideration
  • Company details
  • Share type and value
  • Current shareholders
  • New shareholders
  • Stamp duty declaration

Our stock transfer form template is suitable for use by companies registered in England, Wales and Scotland.

It is not lawful for a transfer of shares to take place without the necessary paperwork and procedures. ADNFCR-1645-ID-800572652-ADNFCR

Further information

 

External information