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:
- 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.