Shares and stocks come under financial assets and thus are an important part of any private limited company. These can be transferred or sold like any other asset under certain conditions, usually bonded by agreements or norms. In this process, the shares, along with the duties or rights, are usually transferred by the owner.
Knowing share transfer in a private limited company is essential for any company owner. If you are looking to gain some insights into the process, you are at the right place.
Reasons for share transfer
In the case of a limited company, share transfer can take place between the transferee and transferor for the following reasons:
- Gifting purposes.
- Death of original shareholder.
- In case of corporate restructuring.
Shares transferred to a spouse or civil partner are counted as gifts. However, the market value of those shares plays a vital role in determining the tax to be paid during the transfer process. Gift Hold-Over Relief can be claimed under some circumstances as transfers that are tax-free.
In order to claim this tax-free way of share transfer, one can fill out HS295 and attach a tax return form.
Process of share transfer in the UK
If one wants to transfer shares to another person in the UK is relatively easy to process and involves a few steps. These include:
Filling out a share transfer form by the companies house
A standard stock transfer form contains the following details:
- Name of the company
- Registration number
- Number of shares that are transferred
- Class of shares being transferred
- Amount paid or pending (if applicable)
- Non-cash payment (if any)
- Name and address of current shareholder
- Name and address of the new shareholder
- Stamp Duty (if any)
There are two types of stock transfer forms that are available at the companies house.
- In case of a paid transfer of shares, J30 needs to be filled. This form contains the details of both the transferor and transferee, along with the amount and form of currency exchanged (if any).
- When a share is transferred in which either the shares are unpaid or partially paid, form J10 is to be filled.
- When a transfer of less than or equal to £1,000 takes place, Certificate 1 of the stock transfer form should be filled.
- In circumstances where there is no payable stamp duty, Certificate 2 must be submitted. This includes scenarios where:
- Shares are received as gifts or from your spouse/civil partner.
- Shares are used as collaterals.
- Shares are transferred as a form of settlement deal.
- Shares left as wills, etc.
In general cases, the transferee does not need to sign anywhere on the stock transfer form. But, there is an exception to the case where the amount remains partially or fully unpaid and the receiving end signs of accepting the liability.
In a case where one is eligible to pay for stamp duty, 0.5% of the total purchase value is charged. If a delay or failure to transfer this stamp duty is observed, penalties along with interest can be applied to the later amount.
One can relieve or eliminate Stamp Duty under some conditions. For this, one can refer to HRMC’s stamp duty section.
As per the new changes observed Stamp Duty process, one should not post the form to HMRC but rather email it.
Notifying Companies House
There is no specific need to notify Companies House about the transfer of shares until the next Confirmation Statement. After this, the updated information will be available at the public register.
Restrictions observed during share transfer
When gifting or selling shares, one should check for any chances of restrictions among the company’s and shareholders’ articles. These may include pre-emption rights and the power of the directors.
Share transfer is a common procedure that most companies follow to introduce new shareholders to the company. The number of authorised shares can be increased at any point in time.
In case of unpaid or pending payments for the shares being issued, there is always a financial risk. One should ensure that proper documents are lined up and signed to avoid any conflict or loss. You may contact Mishoura to get the best legal advice and lawyer that suits well for your case.