How to transfer physical shares

On purchasing a physical share, you get...

When you purchase a physical share from the secondary market, expect to receive the following:

1. A share certificate
2. A transfer deed

The transfer deed is a document that has two parts to it. One part needs to be filled by the seller and the other by the buyer. Together, the two parties complete and give effect to the entire sale. In the process of transfer of shares, the parties involved are the seller, the buyer, the company registrar (who changes the name of the registered holder from the seller to the buyer) and the government (who collects revenue by way of share transfer stamp duty).

 

The transfer deed: the seller's part

The seller's part has the following points covered:

1. Name of the company
2. Quantity both in figures and words
3. Distinctive numbers
4. Certificate number
5. Name of the seller
6. In front of the name of the seller you have his signature
7. Witness name and signature

Basically, the above information answers the essential questions:

1. Whom is he selling to?
2. Which company's stock is he selling?
3. What amount (quantity) is he selling?

The transfer deed: the buyer's part

A buyer of shares receives the share certificate and transfer deed with the seller part duly completed. Now the buyer needs to fill in his details before he can send this for transfer.

The buyer has the following points to complete:

1. Consideration both in words and figures (which is quantity x price)
2. Buyer's name and signature
3. Buyer's occupation
4. Buyer's address
5. Date of purchase (which has to be after the date of the transfer deed)
6. Stamp duty (which is 50 paise per Rs100 or part thereof on the value of consideration)

Basically, the above information answers the essential questions:

1. Who is buying?
2. What is the current value of the stock he is buying?
3. Where does the buyer stay?
4. What is his signature?
5. What share transfer stamp duty has he to pay and has actually paid?

 

Attaching the share transfer stamps

After the buyer has completed all details on the transfer deed, he needs to paste the share transfer stamps for the value as determined. The stamps are affixed on the reverse side of the transfer deed in a space that is provided for this purpose. If the space provided is less, then one can affix stamps in any blank part of the transfer deed but one needs to be careful that no material part where there is information gets covered.

As of today, the stamp duty payable stands at 50 paise per Rs100 or part thereof on the value of consideration paid for the shares. What this means is that if the consideration is Rs279, then the stamp duty is Rs1.50 which is 50 paise for the first Rs100, then another 50 paise for the second Rs100 and another 50 paise for the last Rs79, even though it is less than Rs100 (100+100+79 means stamp duty of 0.50+0.50+0.50)

These stamps can be procured from the Stamp office or its authorised vendors. One can choose to put stamps in excess of the actual duty payable but never lesser than the payable amount.

 

Delivering to the registrar

 

Once the buyer has completed all the documentary formalities, he needs to post or hand deliver these to the registrar of the company. To know the registrar of the company, one can contact his broker or the stock exchange or buy a book which is the directory of the registrars and transfer agents of companies. If none of these are accessible, then he can send the shares to the registered office of the company whose address is printed on the face of the share certificate itself.

The buyer must send these for transfer within the period for which a transfer deed is valid. The validity of the transfer deed has been defined in The Companies Act, 1956 under section 108(1-A) which states:

"...In the case of shares dealt in or quoted on a recognised stock exchange, at any time before the date on which the register of members is closed, in accordance with law, for the first time after the date of presentation of the prescribed form (transfer deed) to the prescribed authority (registrar of company) or within twelve months from the date of Such presentation, whichever is later...."

Translated in layman terms: a transfer deed has a stamp of date on the face of it, which has been put there by the competent government authority. The transfer deed is valid for sending shares for transfer till the first book closure of the company after this date or for one year from this date whichever is later.

The registrar and transfer agents of the company on receiving such a request check the details furnished. They also match the signatures of the seller with those that are recorded as specimen in their records. They check that the consideration paid for the shares was within the traded price on the stock exchange as on the date mentioned. They need to check this because they have to see that correct stamp duty has been paid and one of the easiest ways to pay wrong duty would be to show a low consideration. They also need to check the validity of the transfer deed under section 108 of The Companies Act, 1956.

Once the registrar and transfer agents are satisfied with all details, signatures and duty paid. They endorse the reverse with the name of the buyer, put the buyer's signatures in their records as specimen of the current holder and send the duly endorsed share certificate to the address as provided by the buyer. They also update their register of members with the name of the new holder.