6. Share Transfer Procedure PDF

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Share Transfer Procedure (YourLPC p183, Business Law and Practice p210 – 211; 9.9.1 and 9.9.2) 1. What will the seller do? 2. What will the buyer do? 3. What will the company do? The Seller

The Buyer

The Company

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Must complete and sign a Stock Transfer Form (J10). Must then give this to the buyer (s770-s772). Must give the buyer the share certificate. Must pay for the shares. Must pay Stamp Duty if the transfer is for more than £1000. o Stamp Duty is currently taxed at 0.5%, rounded to the nearest £5. o No duty is charged where the consideration is less than £1000. o Stamp Duty is not charged on transfers between “groups of companies”. Must send the Transfer Form and Share Certificate to the company. Directors will need to decide whether to approve the transfer or not. Model Article 26 gives directors absolute discretion as to whether to register the new shareholder. Check the articles: there may be a special article which amends Model Article 26 to require the directors to approve the transfer to certain people e.g. existing shareholders or family members. Hold a board meeting to approve the transfer; consider company planning procedure process (NVQA)

Refusal:  If the directors refuse the transfer: o They must supply the buyer with notice within 2 months and give reasons for the refusal (s771(1)(b)) and provide such further information as the transferee reasonable requests (s771(2)).

Admin

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o If directors wrongly refuse to approve the transfer then their decision may be challenged by an application to the court for an order to rectify the register (CA 2006, s125). o If the directors rightly refuse, the current owner of the shares will remain the legal owner of the shares, however the buyer will be the beneficial owner. The current owner will hold the shares on trust for the beneficial owner. Must issue a new share certificate in the shareholder’s name and send this to him within two months (s769). Must notify the Registrar of Companies on the annual return AR01 of a change in composition of the membership of the company. Must update the register of members (s771). Must keep a written record of the decision (MA15) and board meeting minutes for 10 years (s248)....