Shares are like any other form of property, they can be transferred between individuals at any time. This can be done because of several reasons:
- The shareholder has died
- They are trying to recoup investment
- They wish to gift shares to family members
So how do I transfer the shares?
Once you have decided to transfer the shares, you will have to fill out a Stock Transfer Form in order to legally transfer the shares. At this point in time, there is no need to inform Companies House, this will be done during your next Confirmation Statement.
If the shares you are selling are sold for more than £:1,000 then you will have to pay Stamp Duty. If this is the case, you will have to send off your Stock Transfer Form to HMRC within 30 days of the effective date of transfer for the form to be stamped.
What needs to be on the stock transfer form?
Your stock transfer form must include the following:
- The company name and registration number
- The number and class (type) of shares being transferred
- The amount paid, or due to be paid, for the shares (if applicable)
- The details of any non-cash payments (if applicable)
- The name and address of the existing owner (transferor)
- The name and address of the new owner (transferee)
- The authorising signature of both parties
- Declaration of Stamp Duty liability (if any)
Once you've filled out the form and had it signed by both parties then you will need to gain approval for it. This can be done by any directors, if they have been given the power to do so in the articles of association. However, if they have not been given the power then you will need to seek approval from all other members. Both the transferor and transferee should be given a copy of the stock transfer form. The transferee should also be given a share certificate once the transfer has been approved. The company must keep all completed transfer forms and share certificates at either its Registered Address or its Single Alternative Inspection Location (SAIL address). The statutory register of members also needs to be updated.
Stamp Duty on Shares
Stamp duty needs to be paid by the person receiving the shares if they are paying more than £1,000 for them. If they are paying less than this, or the shares are transferred as a gift, then there is no need to pay stamp duty.
What amount of stamp duty has to be paid? The amount paid is 0.5% of the value paid for the shares, rounded up to the nearest £5.
Are the restrictions on transfers?
There may be. You should first check the articles of association and the shareholder's agreement to see if there are any restrictions listed in there. There can be restrictions such as:
- Pre-emption rights of existing shareholders
- The directors' power to authorise share transfers
- Buy-back options of the company
- The restriction of transfers to family members
Existing shareholders do have the power to change, remove or amend these restrictions. In order to do this a special resolution must be passed.
What is a special resolution? A special resolution is a legally binding decision made by company directors or shareholders. Resolutions can only be made during official company meetings such as general meetings or board meetings. A special resolution requires a 75% majority shareholder vote in order to be passed.
When do I need to tell Companies House?
There is no immediate need to inform them. The information will be passed to them in your next confirmation statement. But, if you would prefer to inform them sooner then you can update your confirmation statement at any given time. Companies House will update the company register as soon as it receives the updated information.
Overview
With things like this, it's always worth checking your articles of association. You can also find a guide on stamp duty on shares on the Gov UK website, here.
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