Share transfer in a private company: process, stamp duty and forms
A share transfer moves ownership of existing shares from one holder to another. In physical form it uses Form SH-4 lodged within 60 days of execution.
Short answer
A share transfer moves ownership of existing shares from one person to another. Under section 56 of the Companies Act, 2013, a physical transfer needs a duly stamped instrument in Form SH-4, executed by both parties and delivered to the company with the share certificate within 60 days of execution.
- Governed by
- Section 56, Companies Act 2013
- Instrument
- Form SH-4 (physical shares)
- Lodge within
- 60 days of execution
- Stamp duty
- 0.015% of consideration under the Indian Stamp Act
How a share transfer works
For a private company, the articles usually restrict transfers, often through a right of first refusal for existing shareholders or a board approval requirement. Once those steps are completed, the transferor and transferee sign Form SH-4, pay stamp duty, and lodge the form and certificate with the company. The board approves the transfer, the register of members is updated, and the company endorses or issues the certificate within one month. Private companies that are not small companies must now hold and transfer securities in demat form under rule 9B, so transfers in those companies happen through a depository participant.
Tax and FEMA aspects
The seller may owe capital gains tax on the sale, and unlisted share transfers below fair market value can create tax consequences for the buyer or seller under the income-tax valuation rules. If shares move between a resident and a non-resident, the price must comply with FEMA pricing guidelines and the transfer must be reported to the RBI in Form FC-TRS within 60 days of transfer or receipt of funds, whichever is earlier.
Why it matters for startups
Secondary sales by founders or early employees, buy-outs of a departing co-founder and investor exits all involve share transfers. Follow the articles and shareholders' agreement exactly, pay the correct stamp duty and get a valuation where tax or FEMA rules require it. Defective transfers can be challenged later and complicate due diligence.
Related services
Sources
- India Code: official repository of central Acts
- Ministry of Corporate Affairs (MCA) portal
- Reserve Bank of India: FEMA master directions
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Is board approval needed for a share transfer in a private company?
Usually yes, because the articles of private companies typically require board approval and may give other shareholders a right of first refusal.
What is the stamp duty on transfer of shares?
Since 1 July 2020, stamp duty on transfer of shares is 0.015% of the consideration under the Indian Stamp Act.
What is Form FC-TRS?
It is the RBI form for reporting transfers of shares between residents and non-residents, filed within 60 days.