Form SH-4: Securities Transfer Form for Physical Shares

SH-4 is not an MCA e-form

Many founders search for SH-4 on the MCA portal and do not find it. That is because SH-4 is a physical instrument of transfer prescribed under Rule 11 of the Companies (Share Capital and Debentures) Rules, 2014. It is executed by the transferor and the transferee, stamped, and delivered to the company. The company then records the transfer in its register of members.

The Registrar learns about the change indirectly, through the list of shareholders in the next annual return (MGT-7 or MGT-7A). If the transfer creates or changes a significant beneficial owner, BEN-1 and BEN-2 may follow.

Demat rules now limit SH-4

Rule 9A has required unlisted public companies to facilitate demat and permit transfers only in demat form since 2018. Rule 9B, notified in October 2023, extended a similar requirement to private companies other than small companies, with a compliance deadline of 30 June 2025. After that date, a holder of a non-small private company's securities must dematerialise them before transferring, and the transfer runs through the depository system rather than SH-4.

Small companies remain outside Rule 9B, so SH-4 is still the normal route for them. Holding and subsidiary companies cannot be small companies, whatever their size, so a tiny subsidiary of another company is within Rule 9B. A small company that grows past the limits should plan its move to demat.

How a physical transfer works

Section 56(1) requires a proper instrument of transfer, duly stamped, dated and executed by or on behalf of the transferor and transferee, to be delivered to the company within 60 days of execution, along with the share certificate. The company's board approves and registers the transfer and delivers the endorsed certificate within one month of receiving the instrument.

Check the articles before agreeing a sale. Private company articles restrict transfers, often through a right of first refusal for existing shareholders or a board approval requirement. Shareholders' agreements with investors may add lock-ins, tag-along or drag-along rights that must also be respected.

Stamp duty and connected filings

Since 1 July 2020, stamp duty on transfer of shares under the amended Indian Stamp Act is 0.015% of the consideration, collected through the authorised channels. Undervaluing the consideration creates income-tax risk, since the Income-tax Act taxes transfers of unlisted shares by reference to fair market value. Check the current provisions of the Income-tax Act, 2025 before pricing.

Where shares move between a resident and a non-resident, FEMA requires Form FC-TRS on the RBI FIRMS portal within 60 days of receipt or remittance of the consideration, and pricing must follow FEMA guidelines.

Penalties and common mistakes

Section 56(6) makes the company and every officer in default liable to a penalty of ₹50,000 for defaults in complying with the transfer and certificate-delivery requirements of the section. If the company refuses to register a transfer, the transferee can appeal to the NCLT under Section 58.

Common errors are unstamped or under-stamped deeds, missing witness signatures, lodging the form after 60 days, ignoring the articles' pre-emption clause, and transferring physically when Rule 9B already requires demat. Refogo's partner professionals can advise on share transfers and connected filings as part of legal advice services.

Step by step

1. 1Check articles and demat status

   Confirm transfer restrictions and whether Rule 9A or 9B requires demat.

2. 2Agree price

   Value the shares with tax and FEMA rules in mind.

3. 3Execute SH-4

   Transferor and transferee sign before witnesses and date the form.

4. 4Pay stamp duty

   Pay 0.015% of consideration through the authorised channel.

5. 5Lodge with company

   Deliver SH-4 and the share certificate within 60 days of execution.

6. 6Board approval

   Board approves, updates the register of members and endorses the certificate.