What are share transfers, and how is a transfer done?

 

It’s a relatively common procedure, but transferring shares from one shareholder to another is more complex than simply signing them over.

There are various regulatory requirements that must be considered and the transaction is likely to be liable for taxation.

Transfer procedure

The person who holds the shares must arrange for an ‘instrument of transfer’ to be stamped and delivered to the company. These days this can be performed electronically.

Ordinarily a transfer must then be accepted by the company’s board of directors, unless the power has been delegated, usually to the company secretary. Usually transfers will be accepted, unless there is some reason given in the company’s articles of association for declining them.

Once accepted, the transfer will be entered on the company’s registers and new share certificates are issued to the transferee. This should be completed within two months. If the transfer is not accepted, the board will issue a notice of refusal to the transferee.

Visit our company law FAQ pages to learn more about how businesses are governed.

Stamp Duty Reserve Tax

Normally you will have to pay tax if you make a share transfer in any UK company, or transfer shares in a foreign company that keeps a register in the UK.

Share transfers can also take place via a share broker if the company concerned is a listed company on the London Stock Exchange. If the business is not listed, the share transfer can take place by mutual agreement between the buyer and seller.

Stamp Duty Reserve Tax (SDRT) is usually charged when share transfers take place through paperless transactions. These are where the share transfers themselves happen electronically between buyer and seller.

If you use a stock transfer form for your share transfers, you will have to pay stamp duty.

Most paperless transactions use CREST - the electronic settlement and registration system that automatically deducts the required SDRT and sends this to HM Revenue & Customs (HMRC).

You are personally responsible for paying stamp duty to HMRC. If you have any queries about share transfers and the tax you may have to pay, you can call the HMRC helpline on 0845 603 0135.

Getting help

It is always prudent to have a solicitor draw up the agreement for any share transfers you want to complete to ensure they meet all the current regulatory requirements. This can save you considerable expense in the long run by avoiding costly disputes arising.

We can put you in touch with a cost-effective specialist company solicitor free of charge. Please call us on 0800 1777 162 or complete the web-form above.

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