Two different transactions, often confused
A share transfer moves existing shares from one shareholder to another — the total number of shares in issue doesn't change, only who holds them. An allotment creates new shares, increasing the total in issue, whether to existing shareholders (a rights issue), new investors, or as part of an employee scheme. The two are governed by different sections, use different forms, and carry different consequences for the company's cap table.
A transfer between two existing shareholders can feel like a purely private matter between them, but it still needs a properly executed and stamped transfer instrument, board approval to register the transfer, and an update to the company's own register of members — skipping any of these leaves the transfer legally incomplete even if both parties have informally agreed and money has changed hands.
Documents required
For a share transfer
- Form SH-4 (share transfer deed), duly executed by both transferor and transferee.
- The original share certificate being transferred.
- Proof of stamp duty payment on the transfer instrument.
- Board resolution approving the transfer and authorising the register of members to be updated.
For an allotment
- Board resolution approving the allotment, and shareholder resolution where required.
- Valuation report, where shares are allotted at other than face value or to a non-existing shareholder.
- Application money records and bank statements evidencing receipt of consideration.
- Form PAS-3 with the list of allottees and allotment details.
The process, step by step
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For a transfer — execution and stamping
The transfer deed (SH-4) is executed by both parties and stamped at the applicable rate before it's submitted to the company.
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For a transfer — board approval and register update
The board approves the transfer, the original share certificate is endorsed or reissued, and the register of members is updated to reflect the new holder.
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For an allotment — approval
The board (and shareholders, where required) approve the allotment, confirming the number of shares, the price, and the allottees.
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For an allotment — receiving consideration and issuing shares
Application money is received and share certificates are issued to the allottees within the prescribed time.
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For an allotment — filing PAS-3
The return of allotment is filed with the Registrar within 30 days, with the list of allottees and supporting board/shareholder approvals.
Practical notes from our engagements
- Stamp duty on a transfer overlooked entirely. Because it isn't a Registrar filing, stamp duty on a share transfer is easy to miss — an unstamped or under-stamped transfer instrument can be challenged as invalid later, even years after the transfer was informally agreed.
- Register of members not updated after an informal transfer. A transfer that's agreed between the parties and even paid for, but never reflected in the company's own register, leaves ambiguity about who the legal shareholder actually is.
- Valuation not obtained where required for an allotment. Allotting shares to a new investor, or at other than face value, generally needs a valuation to support the price — proceeding without one can complicate the allotment's tax and compliance position.
- PAS-3 filed late. The 30-day window from allotment is sometimes missed where the company treats the allotment as complete once money is received, without tracking the separate ROC filing deadline that follows.
How we handle share transfers and allotments
For a transfer, we confirm the transfer deed is properly executed and stamped before it's submitted to the board, and ensure the register of members is updated as part of the same engagement, not left informal. For an allotment, we confirm whether a valuation is needed before the price is finalised, and track the PAS-3 filing deadline separately from the allotment itself.
Related services
Frequently asked questions
Does a share transfer between two existing shareholders need to be reported to the ROC?
Not through a specific standalone ROC filing at the time of transfer — but it needs to be reflected in the company's register of members, and it will show up in the shareholding pattern reported in the next annual return.
Is stamp duty really required on a share transfer?
Yes — the transfer instrument (Form SH-4) needs to be stamped, currently at a uniform rate of 0.015% of the transaction value, under the Indian Stamp Act.
What's the difference between a share transfer and an allotment?
A transfer moves existing shares between shareholders, with no change in total shares issued. An allotment creates new shares, increasing the total in issue.
Do we need a valuation report for every allotment?
Generally required where shares are allotted at other than face value, or to someone who isn't already a proportionate existing shareholder — a straightforward proportional rights issue at face value may not need one, but this should be confirmed for your specific case.
What's the deadline for filing PAS-3 after an allotment?
Within 30 days of the allotment being made.
Can a share transfer be completed without physically endorsing the original share certificate?
The original certificate is generally required as part of completing the transfer process — this is worth confirming for the specific company's share certificate practice, particularly if certificates were issued some years ago.