MCA Share Transfer Procedure for a Private Limited Company in India (2026)
Transferring shares in a private limited company is a routine but legally sensitive event that must follow the process laid down in Section 56 of the Companies Act, 2013. Whether you are bringing in an investor, exiting a co-founder, or gifting shares within a family, the transfer only becomes valid once it is properly executed on Form SH-4, stamped, approved by the board, and recorded in the register of members. This 2026 guide walks through each step, clears up the common confusion around stamp duty rates, and explains how a transfer differs from a transmission.
What a share transfer means
A share transfer is the voluntary movement of ownership of shares from an existing shareholder (the transferor) to another person (the transferee) for a price or as a gift. In a private company, shares are not freely tradable the way listed shares are & the right to transfer is usually restricted by the Articles of Association (AOA). The transfer is a private contract between the two parties, but the company must approve and register it before the transferee is recognised as a member.
The governing instrument is Form SH-4, the share transfer deed prescribed under Rule 11 of the Companies (Share Capital and Debentures) Rules, 2014, read with Section 56 of the Companies Act, 2013.
Transfer vs transmission: know the difference
These two terms are often confused, but they are legally distinct and follow different paperwork.
| Basis | Transfer | Transmission |
|---|---|---|
| How it happens | Voluntary act (sale or gift) between two living persons | By operation of law on death, insolvency, or lunacy of a member |
| Instrument used | Form SH-4 (transfer deed) | No SH-4; application by legal heir or nominee |
| Stamp duty | Payable on the transfer deed | No stamp duty payable |
| Key documents | Executed SH-4, share certificate, consideration proof | Death certificate, succession certificate or probate, nomination |
Step-by-step share transfer procedure
1. Check the Articles of Association
Before anything else, review the AOA. Private companies almost always restrict share transfers. Common restrictions include a right of first refusal (ROFR), which requires the selling shareholder to first offer the shares to existing members at a fair or agreed price before selling to an outsider, and pre-emption or board-consent clauses. Ignoring these clauses can make the transfer void, so the process must respect whatever the AOA specifies.
2. Give notice and clear pre-emption rights
If a ROFR applies, the transferor issues a notice to the company and existing members. Only when existing members decline to buy (or the required consent is obtained) can the shares move to the intended transferee.
3. Execute Form SH-4
The transferor and transferee complete and sign Form SH-4, which captures the company name, CIN, class and number of shares, distinctive numbers, folio number, consideration amount, and the details of both parties. The form must be dated, witnessed, and stamped.
4. Pay stamp duty on the transfer deed
Stamp duty is mandatory and is where most people get the rate wrong, so it is worth clarifying:
- Physical transfer of shares in certificate form (via SH-4): the rate is 0.25% of the consideration or market value, whichever is higher — that is 25 paise for every Rs 100. This is the rate that applies to most private-company transfers done on physical certificates.
- Transfer of shares held in demat (delivery-based, through a depository): the rate is 0.015% of the consideration, collected automatically by the depository under the uniform stamp duty regime introduced by the amended Indian Stamp Act with effect from 1 July 2020.
So the widely quoted 0.015% figure applies to demat/delivery-based transfers, while off-market physical transfers on SH-4 continue to attract 0.25%. For example, on shares worth Rs 2,00,000, a physical transfer attracts about Rs 500 in stamp duty, whereas the same value in demat would attract about Rs 30. Duty on physical deeds is paid using share transfer stamps affixed to the SH-4 or via e-stamping/franking, depending on the state.
5. Deliver documents to the company within 60 days
The executed and stamped SH-4, together with the original share certificate (or the allotment letter), must be delivered to the company within 60 days from the date of execution of the transfer deed. Missing this window can invalidate the instrument and require fresh execution.
6. Board approval
The board of directors considers the transfer at a board meeting and passes a resolution approving (or, where permitted by the AOA, refusing) it. The board verifies that AOA restrictions have been satisfied and that the documents are in order.
7. Register the transfer and issue certificates
Once approved, the company records the transfer and endorses the share certificate in the transferee’s name. Under Section 56(4), the company must deliver the certificate to the transferee within one month of receiving the instrument of transfer.
Documents required
- Duly filled, signed, dated and witnessed Form SH-4
- Original share certificate or letter of allotment
- Proof of stamp duty payment (share transfer stamps, e-stamp or franking)
- PAN and KYC details of transferor and transferee
- Board resolution of the transferee, if the transferee is a company
- Consideration proof and, where relevant, a share valuation report
- Notice and consent records evidencing that AOA/ROFR requirements were met
Updating the register of members
The transfer is legally complete only when the company updates its register of members, maintained in Form MGT-1 under Section 88. The entry records the transferee’s name, address, PAN, folio number, certificate and distinctive numbers, number of shares, and the amount paid up. The register should be updated promptly after board approval, and the corresponding entry made against the transferor. Keeping the register current is essential because it is the statutory record of who owns the company.
If you would rather hand the entire process to specialists, our team can manage your end-to-end share transfer compliance from SH-4 drafting to register updates, so nothing is missed.
Common mistakes to avoid
- Overlooking ROFR or pre-emption clauses in the AOA
- Applying the wrong stamp duty rate (0.015% vs 0.25%)
- Delivering the SH-4 to the company after the 60-day window
- Failing to update the register of members and endorse certificates on time
- Treating a transmission (on death) as a transfer and wrongly executing an SH-4
Frequently asked questions
Is Form SH-4 filed with the MCA or ROC?
No. Form SH-4 is not filed with the MCA or ROC. It is a deed exchanged between the parties and submitted to the company, which then records the transfer internally in its register of members and endorses the share certificate.
What is the current stamp duty on a physical share transfer?
For a physical transfer executed on Form SH-4, stamp duty is 0.25% of the consideration or market value, whichever is higher (25 paise per Rs 100). The lower 0.015% rate applies to delivery-based transfers of shares held in demat form through a depository.
What happens if the SH-4 is not delivered within 60 days?
The instrument can be treated as invalid. In practice the parties usually have to execute a fresh, correctly dated and stamped SH-4, so it is best to complete delivery well within the 60-day limit.
Can a private company refuse to register a share transfer?
Yes. Because a private company can restrict transfers through its AOA, the board may refuse to register a transfer if the restrictions are not met, provided the refusal is made in good faith and communicated within the timelines under Section 56 and Section 58.
How is a transmission of shares handled?
Transmission occurs by operation of law, such as on the death of a shareholder. No SH-4 or stamp duty is involved; instead the legal heir or nominee applies with documents like the death certificate and, where required, a succession certificate or probate, and the board records the transmission in the register of members.
Share transfers look simple on paper, but a small slip on stamp duty, AOA restrictions, or the 60-day timeline can invalidate the whole exercise. If you would like a smooth, compliant handover, TAXAJ can guide you through every step and keep your statutory records in order — reach out to us to get started.
