How to remove a shareholder from a limited company? (…and how to transfer shares to a new shareholder)

A shareholder can leave a company for a variety of reasons. The board might have decided to remove the association with a shareholder, or shareholder might want to voluntarily get removed from the position or simply be removed due to death.

After removing a shareholder, a company cannot hold any unallocated shares as per company regulation. Hence the shares of the eliminated or removed shareholder must be transferred to someone else as a gift or as a sale. In this article, let us focus on how to transfer shares to a new shareholder in a limited company.

1.Ownership of share transfer:

Shares of a limited company can be gifted or sold through a stock transfer form. The company director or an accountant can complete this form and legally transfer shares from one person to another. It is not necessary to inform Companies House during this period but they must be notified on the next annual confirmation statement (formerly the annual return) in order to update their public register.

1.1. What does a stock transfer form include?

A stock transfer form includes:

  • Company details
  • Consideration (what is given in exchange of shares)
  • Share value and type
  • Current and future shareholders information
  • Stamp duty declaration (if required)

2. Share transfer fee:

A stamp duty tax must be paid by the new shareholder if the share transfer involves a monetary value.

  • An exemption certificate has to be completed if the value of the sale is less than £1000 and it is not necessary to inform HMRC about the transaction.
  • If the value of the transaction is more than £1000, the stock transfer form has to be sent to HMRC within 30days from the effective date of transfer, in order to get approved and stamped.

3. Share transfer value:

The new shareholder has to pay the duty tax at a rate of 0.5% of the total sale value. The stamp duty is not payable if the shares are gifted to someone or if the transaction value of the shares is less than £1000.

When does the share transfer become effective

Once the documents are received, the company must cancel the old share certificate and update its shareholder’s register. The transferee is issued with a new share certificate within two months of the transfer. Transfer of shares becomes binding once the new shareholder is notified with this stock certificate.

 

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