Shares can be transferred in many ways. If you are transferring shares in a listed company, then you (or your broker) will generally use an un-certificated system such as CREST. However for a private company, the more normal instrument is a stock transfer form.
You may also consider using a share sale agreement (or share purchase agreement) though this is not strictly necessary for simple transfers. A share sale agreement is a contract between the seller and the buyer of the shares and sets out the terms and conditions of the sale. It will generally include such things as:
- the consideration (or price) to be paid;
- any warranties and/or indemnities to be provided;
- details of any restructuring of the company that will be involved; and
- non-compete provisions.
However the share sale agreement does not actually transfer the shares to the buyer; this is done by the stock transfer form.
Once the stock transfer form has been completed and signed then it may need to be stamped. Stamp Duty is a tax payable on certain instruments (including stock transfer forms) where the consideration is £1,000 or more. If stamp duty does need to be paid, then you will need to send the stock transfer form to HM Revenue & Customs for stamping.
Once the stock transfer form has been stamped (or certified as exempt from stamping) then you will need to deliver the stock transfer form to the directors of the company for registering. Then, if they are happy and subject to the company’s articles of association, the directors will register the transfer and update the register of members. Only at this point will the shares be transferred.
This article was provided by Elemental CoSec, providers of professional company secretarial services. For more information, please see their guide to the stock transfer form.
The transfer of shares can lead to numerous legal and tax issues and the above is a very general overview, so please do discuss your needs with experts before proceeding with a transfer of shares.