How to transfer shares in a Ltd Company

Last Updated: Mar 16, 2021
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Following the completion of the transfer shares form, it and the original share certificate need to be sent to the company for enlistment.

There are lots of checks the company will desire to carry out

  • The person in charge of preserving the company’s register of members is in charge under the Companies Act 2006 for making sure that every transfer accepted for registration are appropriately stamped or properly certified as exempt.
  • That the details of the transferor on the stock transfer form are equivalent to those entered in the members’ registers;
  • Should shares be paid partly or unpaid, that the correct form, J10, has been filled and the transferee has signed to admit liability for upcoming messages on the shares;
  • That the share certificate brought back is legitimate. That is, an active certificate based on the records of the company. In case the share certificate isn’t available, the company must insist that a form of insurance is completed by the person transferring the shares. Our post on typical circumstances involving share certificates talks about dealing with this;
  • If the individual signing for the transfer is not part of the subscriber put down in the member’s register, they possess the right to organise the ansfer.
  • That the number and share types on the stock transfer form is the same as those held by the transferor;

The board of directors will decide whether to endorse the transfer or not

Approval of the transfer by the company in most cases is a formality, verified through a board resolution, except if an officer of the company has earlier been authorised to allow share transfers. On the other hand, there exist a good number of reasons why the transfer may be rejected. A few likely examples are:

  • The shares are not completely paid and the planned transferee has not accepted liability for prospective calls on them;
  • The proposed share transfer is to an infant, a person of unreliable mind, an insolvent or a body that is not a corporate body who is able to hold shares itself;
  • Whenever the company bears a lien on the shares;
  • Wherein the Articles of Association describes pre-emption rights over the shares and the suitable process related to these rights are not followed;
  • The transfer hasn’t been properly documented by making use of a suitable form;
  • The transferring subscriber has not returned their share certificate and/or the filled and signed form of insurance (indemnity);
  • Whenever transfers in the shares have been put on hold (for instance in the course of a close moment).
  • The attempted move is in respect of multiple classes of share or even above a specific number of mutual beneficiaries, the regular upper limit being four;

If in doubt, go through the company’s Articles of Association for limitations that apply!

A planned share transfer needs to be rejected or processed within two (2) months of receipt. In the process of rejecting a transfer, the causes for such refusal should also be provided within that timeframe. Although reasons need to be provided, it is not necessary to provide minutes of directors’ meetings as proof of the stated reasons.

The company updates its registers, withdraws the obsolete share certificate( s ) and gives any fresh certificate( s )where it is needed

Immediately when the transfer is endorsed, the company has to update its legal registers as follows:

  • Cancel the entry in the member’s register relating to the former subscriber. If only a few of their shares have been transferred, the register will need to reveal their reduced shareholding;
  • Insert an entry in the member’s register for the transferee and the shares transferred to them. Yet again, a current entry may have to be updated should there be a subscriber in the company prior to the transfer; and
  • Make an entry in the transfer’s register (provided the company has one).

Additionally, you will need to update the share certificate status, which will include

  • Withdrawing old share certificates;
  • Giving out a new share certificate to the new subscribers;
  • In case it is only a few of the shares covered by the obsolete share certificate are transferred, issue a new certificate for the balance of the shares being kept by the transferor; and update the company’s log of share certificates accordingly.

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At a later point, the transfer is validated to Companies House as part of the Annual Return

Neither the stock transfer form nor the new share certificates must be recorded with Companies House. There is also no need to notify Companies House of a share transfer at the time it takes place: in fact, the company still possesses the same number of shares in issue, although a few of those shares are now owned by different subscribers.

Rather, details of every transfer need to be included in the company’s next Annual Return.

Article by

Jody Smith

A content and media expert, I have worked for 7 years alongside start-ups and small businesses to effectively promote their brands through blogs, social media and content marketing strategies.

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