The transfer of shares in a UK company to a new shareholder, whether by sale or gift, is very common. Although private companies may expect transfers in their company’s shares to be rare, various circumstances can lead to a share transfer. These include:
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Before agreeing to buy shares the purchaser may, especially if the amounts are significant, wish to obtain a professional valuation and draw up a detailed contract for the purchase. Here we’ll just assume that the buyer has satisfied themselves.
We also presume that the shares can be transferred and that no particular restrictions apply. While this will often be true, there are a number of scenarios where shares cannot be transferred or a share transfer is only possible after a prescribed procedure is followed. In other articles, we cover in more detail the restrictions that may apply from a company’s articles of association, a shareholders’ agreement or rights of pre-emption.
The transfer procedure in summary is:
Let’s look at each of these stages in turn, starting in this article with the steps up until the company receives the completed share transfer documentation.
A stock transfer form is the document usually used for the transfer of shares. You may see it referred to as form J30 or a share transfer form, but it means the same thing.
The person selling the shares (often called the ‘transferor’) should complete their details on the stock transfer form, including their name and address as well as identifying the shares to be transferred, and then sign it. There are some circumstances, like when shares are being transferred on the death of a shareholder, where someone other than the transferor may sign either additionally or instead of the person listed in the company’s register of members.
The name and address of the person receiving the shares also need to be included, although the recipient will not normally need to sign the stock transfer form. It’s important that the so called transferee’s details are correct on the form as this is how they’ll appear in the company’s statutory records.
If more than one class of share is being transferred, a separate stock transfer form should be completed for each class.
We’ve produced a step by step guide to completing a stock transfer form, as well as a free stock transfer form template which you can download and complete. The guide covers the majority of scenarios that may arise and how to document them on the share transfer form.
We said above that the person receiving the shares doesn’t usually have to sign the stock transfer form. The exception is where shares are unpaid or partly paid: these carry with them a liability for the unpaid amount to be paid to the company when it falls due. The person who obtains the shares via transfer must sign to say they accept that liability, whether they are receiving the shares by purchase or by gift. Unpaid or partly paid shares are transferred using form J10 rather than the standard form J30 used for transfers of fully paid shares.
The buyer should also receive the share certificate from the seller covering the shares to be transferred. They’ll also want to check that the details entered by the seller on the stock transfer form, particularly concerning the number of shares and consideration, match their understanding.
Stamp duty is payable by the purchaser of the shares if the consideration value is more than £1,000, whether cash is provided or some other form of consideration (such as an offer of services) is provided instead. The person signing the certificate must confirm that the transaction does not form part of a larger transaction or series of transactions which would in total exceed £1,000, so there’s no way to process a number of small transactions in order to avoid stamp duty becoming payable on the full consideration of a transaction.
Failure to pay stamp duty may result in penalties and interest being applied to the late amount.
The current rate for stamp duty is 0.5% of the consideration value and is rounded up to the nearest £5. For example, if £2,600 is paid for some shares, stamp duty will be payable as the consideration is above £1,000. 0.5% of £2,600 is £13, which rounded up to the nearest £5 would mean £15 would be payable in stamp duty.
In a few cases, reliefs will apply which reduce or eliminate the stamp duty payable. More commonly, the transfer may be subject to an exemption. Exemptions cover a whole range of possible scenarios, which are covered in our guide to completing a stock transfer form.
If the transfer is exempt from stamp duty it must be certified and signed to that effect on the reverse of the stock transfer form. If the transfer is thus exempt and no stamp duty is payable, there is generally no requirement to send the stock transfer form to HMRC. In that case, the certificate can be sent directly to the company to be processed.
If stamp duty is payable, you’ll first need to send the stock transfer form to HMRC by email to [email protected].
Do not post a cheque to pay stamp duty. Pay by one of the following methods:
Provide a payment reference so that HMRC can identify your stamp duty payment. The bank details are as follows:
To pay from UK accounts:
Sort code – 08 32 10
Account number – 12001098
Account name – HMRC Birmingham Stamp Office
To pay from overseas accounts:
Account number (IBAN) – GB02BARC20114773618595
Bank identifier code (BIC) – BARCGB22
Account name – HMRC Birmingham Stamp Office
If you are asked for HMRC’s banking address it is:
Barclays Bank Plc
1 Churchill Place
London
United Kingdom
E14 5HP
There’s no need to send the share certificate covering the shares to HMRC. You also don’t need to send any documents to Companies House at this stage.
The deadline for paying the stamp duty due is 30 days after the share transaction takes place. Failure to pay may result in penalties and interest being applied to the late amount.
If the Stamp Office is not satisfied that the consideration stated on the stock transfer form represents the full value of the shares being transferred, it will ask for documentary evidence to support the valuation. However, once satisfied, the Stamp Office will stamp the stock transfer form, showing the amount of stamp duty received or, if no stamp duty is payable, the fact that the transfer has been adjudged as not requiring stamp duty to be paid.
If you have specific queries about stamp duty, HMRC have further detailed information available in the stamp duty section of their website.
Our next article continues this guide to the procedure for share transfers, picking up at the point the company really becomes involved in the share transfer process.
Inform Direct is the innovative and easy way to manage a company's shares, make new share allotments, record share transfers, produce share certificates and much more.