Shares are property and, subject to agreement, can be sold or gifted away like any other type of property.
Share transfers in small private limited companies usually arise when:
- Shares held in trust, are transferred to the beneficiary.
- Another owner/director is being brought into the company, or there is an agreement between business partners.
- The existing owners wish to share profits with employees.
- The owner wishes to share profits with spouse or family, as part of a tax planning arrangement.
However, if there is a prior agreement between shareholders, a sale of shares can be subject to their approval.There can be any number of reasons to have a shareholder’s agreement that restricts the sale of shares.
These include:
- The introduction of another shareholder is similar to introducing a partner. The new partner may not be a good fit.
- Shareholders may not want shares being held by a competitor
- A family company may not want shares leaving the family.
- To prevent a fellow shareholder gaining a majority control of their company.
Assuming that there is nothing stopping the sale or transfer of shares, the paperwork is quite simple.
A transfer will require the completion of either a Form J10 or J30. These are both stock transfer forms and contain the same information, however:
- Form J30 is used when the shares being transferred are fully paid up. It only requires the signature of the person selling or transferring the shares.
- Form J10 is used when the shares being transferred are partly paid or unpaid. The owner of partly paid or unpaid shares is potentially liable for the unpaid element of the shares. By signing
Form J10 the transferee accepts the liability.
The information required by both forms is as follows:
- Consideration – That is the amount of money or the value of goods given in exchange for the shares.
- Full name of Company
- Full description of shares or security being transferred, usually the share class. For instance “A Ordinary Shares of £1 each”
- Number of shares or stock being transferred
- Transferor (s) – name and address of the shareholder selling or giving away the shares. Jointly held shares will require all the names but only one address.
- Transferee (s)-name and address of the person (s) buying or receiving the shares
- Date-The day on which the form is signed
- Signature of the transferor and, if you are using J10, the signature of the transferee.
- Details of the person lodging the certificate. It may be that a third party, such as an accountant or lawyer is lodging the form with the company. The purpose is to notify the company of the transfer so that the statutory records can be updated.
The reverse side of both forms contain certificates that need completing. Completion of either certificate means that stamp duty is not payable on the transaction. If stamp duty is not payable, the company secretary or directors must update the Register of Members. Stamp duty is payable if the transfer is not exempt and the value exceeds £1000.