Legal Advice

Transferring Unlisted Private Company Shares as a Gift: Stamp Duty, Processing Time, and Selling Restrictions

Question: My father is planning to gift me some unlisted private company shares. We will register a gift deed and pay a stamp duty of 0.25% per Rs.100 of net worth. After that, we will submit the gift deed, share certificate, and share transfer form to the company. I have a few questions regarding this process: Can you please confirm the stamp duty to be paid on this transaction in Maharashtra? How much time does it generally take for the transfer of shares by gift to get recorded in the Registrar of Companies (ROC)? Can I sell those shares immediately, before the transfer of shares by gift is recorded in the ROC?

Advise

Stamp duty rates may vary depending on the state. In Maharashtra, the stamp duty for gift deeds of shares is 0.25% of the market value of the shares being gifted. However, it is advisable to confirm the current rates and any applicable exemptions or concessions with the local registrar or a legal professional.

The transfer of shares by gift may take some time to get recorded in the ROC, as it involves a process of verification and approval. The company will need to update its share register and notify the ROC of the transfer. This process may take a few weeks or even a few months, depending on the efficiency of the company and the ROC.

Technically, you can sell the gifted shares immediately after receiving them, but it is recommended that you wait until the transfer is recorded in the ROC. This is because the buyer of the shares may require proof of ownership, and the transfer may not be legally valid until it is recorded in the ROC. Additionally, if you sell the shares before the transfer is recorded, it may create complications in the future if the transfer is not completed for any reason.

Shivendra Pratap Singh

Advocate

High Court Lucknow

Civil Law

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