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A Step-by-Step Guide to Share Transfers in a Private Limited Company
By Shannon Power, 1st November 2024
When shareholders need to change ownership of their shares, whether by selling, gifting, or passing them on, understanding the process of a share transfer is essential. A share transfer involves legally transferring ownership rights from one individual or entity to another and plays a crucial role in corporate operations. This guide explores the types, steps, and key considerations involved in share transfers, with specific insights into the Irish market.
What are Share Transfers?
The term ‘Share Transfer’ refers to the process of transferring ownership of shares from one person or entity to another. This transaction is likely to occur between individual shareholders, companies, or other legal entities. Share Transfers are common in both private and public companies when shareholders wish to sell, gift, or pass on their shares to someone else. The transfer of shares usually takes place during corporate restructuring, estate planning, and investments, allowing shareholders to adjust or redistribute ownership of the company.
Types of Share Transfer:
- Voluntary Transfer: This is the most common form of transfer and occurs when a shareholder decides to sell or transfer their shares to a new individual/entity.
- Involuntary Transfer: This type of transfer occurs when a shareholder has no choice but to transfer their shares to another entity due to death, bankruptcy, or court order.
Some companies, particularly private ones, will put restrictions in place to limit the transfer of shares. A Shareholders Agreement or company bylaws, contained in the Company Constitution, can set these restrictions to control ownership.
The Key Steps to Any Share Transfer in a Private Limited Company
The following steps are usually required when completing the transfer of shares for a Private Limited Company in Ireland:
- Check the Constitution / Memorandum and Articles of Association of the company for any pre-emption rights restricting the transfer of shares.
- Prepare a Stock Transfer form
- Preparation of Stamp Duty Revenue form SD4
- Directors Board Minutes
- Updating internal company registers such as the register of members, register of transfers, register of interests, and if required, the register of beneficial ownership.
- Issue of New Share Certificate/s
- Making changes to the RBO if necessary
- Informing the CRO on the next annual return
- Preparation of a deed of transfer
- Preparation of a deed of adherence
If you are considering a transfer of shares in your company, it is recommended that you seek professional advice. Contact us today and our expert team can guide you through the process every step of the way.
Stamp Duty on Share Transfers
In Ireland, stamp duty is generally payable at a rate of 1% on certain share transfers. This rate applies when the consideration for the shares is valued at €1,000 or more. However, if the shares derive the majority of their value from Irish real estate, a higher rate of 7.5% is applied.
There are, however, exemptions to stamp duty. If the consideration for the shares is less than €1,000, no stamp duty is required. Additionally, an exemption can apply for transfers between spouses, commonly known as the spouse exemption, under Section 96(2) of the Stamp Duties Consolidation Act, 1999.
Conclusion
Completing a share transfer involves careful steps and adherence to company policies and tax requirements, especially in private companies. From verifying pre-emption rights to ensuring proper governance, documentation and legal instruments, as well as notifying regulatory authorities, each step is essential for a smooth and legally sound share transfer.
Given the complexity, seeking expert guidance can simplify the process and ensure compliance with all legal and tax obligations. If you’re considering a share transfer, reach out to our team for personalised support to make your transfer as seamless as possible. Give our team a call at +353(0)1 6461625 or fill out our contact form !
It is also important to note that a Share Transfer is not the only way for companies to remove a shareholder. For example, shareholders can also be removed through Share Buybacks or forfeiture. For more information please get in contact with out team.
Disclaimer: This article is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Company Bureau for any action taken or not taken in reliance on the information set out in this article. Professional or legal advice should be obtained before taking or refraining from any action as a result of this article. Any and all information is subject to change.
