A practical guide to transferring shares

Transferring shares from a shareholder in a private limited company is not a simple case of completing and submitting a filing to Companies House. Instead, you need to follow defined processes to enable the transfer of share ownership from one person to another.

This article provides a step-by-step guide to transferring shares, applicable to most private companies limited by shares.

8 steps to transferring shares

The 8 steps below outline the standard process of transferring the ownership of existing shares from one person to another in a UK private limited company. 

1. Identify the recipient of the shares

The person seeking to transfer their shares (the ‘transferor’) usually needs to find someone to take the shares. In other words, they need to find a willing buyer. Alternatively, the transferor may want to gift their shares to someone, such as a family member.

However, some companies include pre-emption rights on share transfers in their articles of association or a shareholders’ agreement. If pre-emption rights exist, any person seeking to transfer their shares must first offer them to the other shareholders pro rata (i.e. proportional to their current percentage of shareholdings in the company) – unless those pre-emption rights are waived or disapplied. 

Even if the articles or shareholders’ agreement don’t provide for pre-emption rights on transfers, you can still give the existing shareholders the option to buy the shares. This is often the most stable course of action for the company rather than selling the shares to an outside investor.

2. Agree on a sale price

Once you identify a buyer, the price (‘consideration’) for the transfer of shares will need to be agreed upon. That is, the amount the buyer will pay the seller in exchange for the shares.

In general terms, there aren’t many rules on how much shares can be sold for. It is primarily for the buyer and the seller to come to an agreement. Indeed, it is often possible to transfer shares for free.

• A guide to limited company shares
• Tax on shares – everything you need to know
• How to update shareholder information at Companies House

It is also possible to transfer shares for a different form of payment – for example, in exchange for certain services. A consideration for something other than money is called a non-cash consideration.

After identifying a seller and agreeing on a consideration, the parties sometimes enter into a share purchase agreement. Whether or not a share purchase agreement is appropriate usually depends on the particulars of the transfer.

3. Complete and execute a stock transfer form

The stock transfer form is a document that records the key details of the transfer of shares, including:

• Name of the company in which the shares are held 
• The class of shares being transferred (e.g. ‘Ordinary’ shares)
• Number of shares being transferred
• Name and address of the transferor (existing shareholder)
• Name and address of the transferee (new shareholder)
• The consideration paid (if any) for the shares

Depending on whether the shares being transferred have any unpaid amounts left on them, the stock transfer form used will either be the J10 or the J30. 

Once the stock transfer form is complete, the transferor signs and dates it. Where there is still a liability attached to the shares (i.e. where a J10 form is being used), the buyer will also need to sign and date the form. 

If the share transfer is exempt from Stamp Duty, the transferee must also complete Certificate 1 or 2 on the reverse of the stock transfer form. 

You do not need to complete either certificate if no consideration is given for the shares or you’re claiming Stamp Duty relief. 

4. Deliver the signed stock transfer form to the company and approve the transfer

The executed stock transfer form should be sent to the company’s board of directors to decide whether or not to approve the proposed transfer. This includes approving it subject to compliance with any restrictions and procedures that may be applicable. 

For example, if there are pre-emption rights in place, the board will need to arrange for the procedure to be followed or for the existing shareholders to disapply their rights on that occasion. 

Subject to meeting all requirements, the board will usually accept the transfer of shares.

5. Pay Stamp Duty (where applicable)

As mentioned earlier, Stamp Duty liability may arise on certain transfers. Generally, if the value of the share transfer exceeds £1,000, the purchaser will need to pay Stamp Duty to HMRC at 0.5% of the sale price of the shares (rounded up to the nearest £5).

Where Stamp Duty applies, the transferee should email the stock transfer form to HMRC within 30 days of signing, and pay any Stamp Duty due within the same 30-day period. The transferee must also include a copy of any share purchase agreement or supporting documents if the Stamp Duty charge is calculated by reference to them.

If HMRC is satisfied that you’ve paid the correct amount of Stamp Duty, you will receive a letter confirming this. You must send a copy to the company for their records.

If you’re claiming Stamp Duty relief, you must send the completed stock transfer form and details of the relief you’re claiming to HMRC for consideration.

Generally, you don’t need to send the stock transfer form to HMRC for stamping or pay any Stamp Duty if you’ve completed certificate 1 or 2 or don’t give any consideration for the shares.

6. Update the register of members and issue the share certificate(s)

Now that the stock transfer forms have been executed and approved by the director(s), and any Stamp Duty liability has been dealt with, the transfer may be entered in the company’s statutory register of members.

Updating the register to reflect the transfer is an important step, as this is what gives it legal effect. The transferee only becomes the legal holder of those shares when their name is entered in the register alongside details of their shareholdings, so the directors should do this as soon as possible.

The seller of the shares should then hand their share certificate(s) to the company to cancel. The company usually does this by writing ‘CANCELLED’ on the face of all outdated certificates and any copies. 

Unless the seller transfers all their shares, they will receive a new certificate to reflect their updated shareholdings. The company will also issue a share certificate to the transferee as evidence of their share ownership. 

Generally, a share certificate includes the following information:

• Basic company information, such as name, number, and registered office address
• Date of the share certificate’s issue
• Certificate number (a unique identifying number for the certificate)
• The shareholder’s name and address
• Number, class, and nominal value of the shares held
• The paid-up status of the shares (i.e. fully paid, partly paid, or unpaid shares) 

Two directors must sign the share certificate. If your company has only one director, the company secretary or a witness can provide the second signature. 

To comply with section 776 of the Companies Act 2006, the company must issue the certificate to the new shareholder within two months of the date the transfer completes. 

7. Update the PSC register

When a company’s shareholdings change, the directors must also consider whether they need to update the register of people with significant control (PSC register).

For example, if the transferee now holds more than 25% of the company’s issued shares, the directors need to update the PSC register to identify the shareholder as a person with significant control.

Likewise, if the transferor is a PSC, the directors must update the PSC register to reflect their new shareholdings after the transfer. If they are no longer a PSC, the register should be updated with the date they ceased to be a PSC.

Any required updates must be made within 14 days of the date the changes occurred. The directors must also notify Companies House of the changes within a further 14 days (so, within a total of 28 days from the date any changes occurred).

8. File a confirmation statement

The final step in the process is to file a confirmation statement with Companies House. You don’t need to do this until your next confirmation statement is due. However, it is good practice to file an early statement when certain changes occur. This ensures the public register remains up to date.

You should also inform relevant stakeholders in your company of the change in ownership structure – for example, your bank or any regulatory bodies. 

So, there you have it

Those were the 8 steps to transferring shares in a UK private limited company. We hope you have found this article helpful.

If you want to transfer shares in a company, we offer a Transfer of Shares Service for only £129.99 plus VAT. This service includes a stock transfer form, board resolution, and share certificates. We can also prepare and file a confirmation statement to update the Companies House register.

Alternatively, our Full Company Secretary Service may be ideal if you need help fulfilling your statutory administrative duties as a director. This service includes 15 company changes per year (such as share transfers), the maintenance of statutory company registers, and the filing of your confirmation statement.

Please comment below if you have any questions, or contact us directly if you’d like to know more about our corporate services.