How to Transfer Shares in a Limited Liability Company

A transfer of shares, also known as a stock transfer, is the process of changing ownership of shares from one shareholder to another in a limited liability company (LLC). This is a standard operation, however it requires considerable attention to be executed properly, given its importance.

In what circumstances do you need a transfer of shares?

A transfer of shares can be caused by a number of different circumstances. If a shareholder leaves the company, retires, or dies, you will need to perform such an operation. It is worth knowing what the legal steps are when faced with such an issue.

How to make a share transfer?

In the UK, a transfer of shares is made through a stock transfer form, under the Stock Transfer Act 1963. The stock transfer form will usually be filled in by the leaving shareholder. Once it is signed, it will be handed over to the transferee (the person receiving property over the shares) together with a share certificate. A payment will be made at this point if required. The transferee will then fill in the necessary sections of the stock transfer form, including any relevant tax information.

A stock transfer form has to contain the following information:

  • Company details
  • Consideration
  • Share type and value
  • Current shareholders
  • Future shareholders
  • Stamp duty declaration (if needed)

What is a stamp duty and do I have to pay it?

A stamp duty is owed if the transfer of shares also involves a transfer of money or value. If money or value is paid, you will be liable to pay stamp duty, unless the transfer is valued at no more than £1,000. If the value is less than £1,000, you will still need to complete an exemption certificate, but you don’t have to notify HMRC about the transaction.

In case the value is more than £1,000, you are required to pay a stamp duty at 0.5%, rounded up to the nearest £5 on each document to be stamped. That means that if the value of transfer is £1,990, your stamp duty will be £1,990 x 0.5% = £9.95. Rounded up means that you will have to pay £10 in this case.

What are the next steps?

When a stamp duty is owed, you need to send the stock transfer form together with the payable amount to HMRC. The completed and stamped form will then be forwarded by the transferee to the transferor. In case no stamp duty is owed, the stock transfer form will go directly to the transferor.

When the documents are received, the company shall cancel the old share certificate and update its register to its shareholders. A new transfer certificate is then to be issued to the transferee within two months of the transfer.

You don’t need to send the form or notify the Companies House about the transfer, as it will be included in the next annual return of the company.

Linkilaw can assist you in dealing with shares transfers. Please do not hesitate to contact us should you need any help.