When a new shareholder is appointed to a company it is common for them to receive shares by way of a transfer. Although transfers in private companies are rarer, there are a number of events in which they may occur, such as transferring to family members, or when the company structure changes.

Here are 7 things to do when transferring shares…

1. Before you start

If when buying shares the value is significantly high, you may want to have a valuation and possibly a contract created around the purchase.

Before you proceed also you should check that there are no restrictions in place that you need to follow. Restrictions may apply in a shareholders agreement or in your company’s articles of association (required for a company formed in the UK under the Companies Act 2006), so it is important that you check before the transfer goes ahead.

The last thing to check is potential tax implications for both company and director that may result in a share transfer; it is worth making you everyone is clear on the impact of the transfer before it is taken any further.

2. Complete a stock transfer form

When transferring shares it is usual for the share ‘seller’ or ‘transferor’ to complete and stock transfer form (sometimes referred to as a J30).

The form identifies the details of the shares to be transferred and the name and address details of the person selling the shares.

The details of the recipient will also be included. It is important that all these details are captured as these will form part of the companies statutory records.

Usually, the recipient or buyer doesn’t have to sign the form, unless there is a liability involved with the shares being either unpaid or partly paid in which case slightly different rules apply.

3. Pay Stamp Duty

If the value of shares transferred is more than £1,000.00, or if it forms part of a larger transaction the transfer form must be sent to HMRC for stamping so that stamp duty can be paid.

In some cases the transfer may be exempt, and if that is the case the form does not need to be sent to HMRC but simply certified and signed to that effect.

If there is stamp duty to be paid the deadline for paying is 30 days after the share transaction, and if this is not adhered to there are potential penalties or interest applied.

You can find out more details about stamp duty and completing a stock transfer form on the HMRC website here.

4. Check transfer documents

Once the stock transfer form is completed, stamped if required and HMRC have returned it the form and share certificate have to be passed on to the company so that they can register them.

The person who looks after the company’s register of members is responsible under the Companies Act 2006 to make sure that all transfers accepted for registration are handled correctly and either stamped or certified as appropriate; checking things like the validity of share certificates and that details match and so on is important for correct record keeping.

5. Approve the transfer

Approval of the transfer is usually for the board of directors, and is formally confirmed by board resolution. Directors must check the company’s Articles of Association for any reasons why the transfer may be declined, and any proposal must be either processed or rejected within a two month window of having received them. It is therefore really important that company documents are handled efficiently and securely to reduce the risk of missing important deadlines.

It is worth noting too that if other shareholders involved, not just the founder, so for example in the case of a venture fund, all consents to transfer must be documented and stored securely too using a safe management tool such as the BoardSecure portal.

6. Update registers and certificates

Provided the proposed transfer has met with approval within the correct timescale and all the documentation is in place, the company is then required to update its statutory registers including:

• Removing the former shareholder’s details on the register of members
• Adding the new shareholder’s details

Equally the share certificates must be updated by:

• Cancelling old certificates
• Issuing new certificates to new shareholders
• If it is a part transfer updating the current certificates to reflect the new arrangement
• Updating the company log

7. Update Companies House

While you do not need to share the new share certificates or the stock transfer form with Companies House, or inform them at the time of transfer, you do need to remember that details do have to be included in the next confirmation statement that is submitted for the company. While by law it is the register of members that defines who owns shares in a  company, Companies House must be updated as part of the confirmation statement also.

Read our blog ‘5 actions to take when issuing new company shares.’

Read our blog ‘What is a company secretary?’

Check out our BoardSecure portal.