Share Transfer vs Share Allotment: SH-4, Stamp Duty और Records

A transfer moves existing shares between holders; an allotment creates or issues shares through the company’s applicable process. The documents, consideration flow and filings differ. Review the company’s articles, securities form and applicable dematerialisation requirements before assuming a physical transfer instrument is always the correct route. ^[1]

Identify the transfer mechanics

Check the holder’s title, restrictions, certificates or demat position, transferee details, consideration and required approvals. SH-4 may be relevant for an applicable physical transfer; it is not a universal solution for every security or company. Assess the applicable duty separately from incorporation stamp duty.

Reconcile ownership after completion

Update registers and other records only through the proper process. Retain instrument/transaction evidence and reconcile the new holding with future annual returns and beneficial-ownership information where applicable. The company’s paid-up capital generally does not rise merely because existing shares change hands.

Practical preparation checklist

• Existing shareholding, articles and physical/demat status.
• Transferor/transferee, consideration and restrictions.
• Applicable instrument, duty and approvals.
• Register/certificate/demat and annual-record reconciliation.

Illustrative example

An investor buys shares from a founder rather than subscribing for newly issued shares. The money goes under the sale arrangement, not automatically into the company as new capital. The documentation should reflect that distinction.

Avoid this mistake

Do not use PAS-3 as a default form for an ordinary transfer or prepare SH-4 without checking whether the physical route is permitted. Share transfer can also have tax and reporting implications beyond the company-law record.