Share Transfer

Share Transfer in a Private Limited Company: SH-4 Process Explained

A co-founder exiting, an investor buying in, or shares moving within a family - every transfer of company shares must follow a documented process under the Companies Act, 2013, with the correct stamp duty paid. This guide covers exactly how share transfer works, the SH-4 form, and how KanoonPe handles it end-to-end at a flat, all-inclusive price.

Quick summary

• What it is: The legal process of transferring ownership of shares from one shareholder to another, executed via Form SH-4 and updated in the company's register of members.
• Governed by: Section 56 of the Companies Act, 2013; Indian Stamp Act, 1899 for stamp duty.
• Best for: Founder exits, investor buy-ins, family share transfers, and ESOP-linked transfers.
• KanoonPe price: Flat, all-inclusive quote on a free callback · Timeline: typically 4–7 working days.

Quick facts

What is share transfer?

Share transfer is the voluntary process of moving ownership of shares from an existing shareholder (transferor) to another person (transferee), executed through a duly stamped Form SH-4 and recorded in the company's register of members after board approval.

Unlike a public company, a private limited company's Articles of Association can restrict share transfers - commonly through a right of first refusal for existing shareholders. Any transfer must respect these AOA restrictions before the company's board can approve and register it.

Share transfer is different from a fresh allotment of shares (issuing new shares) - a transfer simply moves existing shares between parties; it doesn't change the company's total paid-up capital.

Who needs to process a share transfer?

• Co-founders or shareholders exiting the business and selling their stake.
• Investors acquiring shares in a secondary transaction.
• Family businesses transferring shares between family members for succession planning.
• Companies settling ESOP exercises where employee shares are transferred/bought back.
• Shareholders gifting shares to relatives or trusts.

Benefits of a properly documented share transfer

1. Legal ownership certainty - Only a transfer recorded in the register of members is legally recognised.
2. Avoids disputes - A signed SH-4 and board resolution create a clear paper trail.
3. Banking and KYC compliance - Updated shareholding is needed for bank account changes and statutory filings.
4. Tax clarity - Proper documentation supports correct capital gains computation for the transferor.
5. Investor confidence - Clean share records make future due diligence and fundraising smoother.

Documents required for share transfer

From transferor and transferee

• PAN card of both parties
• Identity and address proof (Aadhaar, passport, or voter ID)
• Original share certificate(s) being transferred
• Duly executed and stamped Form SH-4

From the company

• Board resolution approving the transfer
• Updated register of members
• Consideration details (sale price/valuation, if applicable)
• AOA extract confirming no restriction/right of first refusal issue

Ready to get started? Talk to a verified expert → - get a transparent, all-inclusive quote for your share transfer within one business hour.

Process for share transfer (step by step)

1. Check AOA restrictions. Confirm whether existing shareholders have a right of first refusal or other transfer restriction.
2. Execute Form SH-4. The transferor and transferee sign the securities transfer form along with the share certificate.
3. Pay stamp duty. Stamp duty at 0.25% of the consideration or market value (whichever is higher) is paid via e-stamping or franking, as per the state's rules.
4. Submit to the company. The executed SH-4 with stamp duty proof and original share certificate is delivered to the company within 60 days of execution.
5. Board approval. The Board of Directors passes a resolution approving and registering the transfer.
6. Update statutory registers. The company updates its Register of Members and issues a new share certificate to the transferee within one month.
7. Reflect in annual filings. The revised shareholding pattern is reported in the company's next annual return (MGT-7).

Cost of share transfer in India

KanoonPe offers a flat, all-inclusive quote - SH-4 drafting, board resolution, stamp duty guidance, and register updates bundled into one transparent number. Actual stamp duty (calculated on the transaction value) is shown upfront before you pay.

Timeline for share transfer

Every KanoonPe order carries a written SLA - filed on time or you get a refund.

Penalties for delayed or non-compliant share transfer

• Unstamped or under-stamped SH-4 renders the transfer invalid and unenforceable until the deficient duty and penalty are paid.
• Delay beyond 60 days in delivering SH-4 to the company requires the Registrar's extension approval for registration.
• Ignoring AOA restrictions (e.g., right of first refusal) can render the transfer void and expose directors to disputes from existing shareholders.
• Failure to issue new share certificates within one month attracts penalties on the company and officers under Section 56(4).

Share transfer vs increase authorised capital - what's different

Need to raise your capital ceiling first? See Increase Authorised Capital.

Why choose KanoonPe

• Transparent flat pricing - one all-inclusive number; stamp duty at actuals, shown upfront.
• Filed-on-time or refund - every order ships with a written SLA.
• One accountable case owner - a single named CS manages your transfer end to end.
• Live status tracking - track your share transfer status on your dashboard in real time.

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