Share Transfer and Allotment

Procedures and forms under the Companies Act are periodically revised. This article is for general information and does not constitute legal advice.

Share Transfer

A share transfer moves existing shares from one holder to another, using Form SH-4, executed by both transferor and transferee, and delivered to the company along with the share certificate. It’s subject to any restrictions set out in the AOA, particularly relevant for private companies, which typically restrict free transferability by design (a right of first refusal to existing shareholders is a common example). A public company, by contrast, generally can’t restrict transferability of its shares in the same way.

Share Allotment

An allotment is the issue of new shares by the company itself, increasing its total share capital, reported through Form PAS-3 along with the return of allotment, filed within 30 days of the allotment. Depending on how the shares are offered, private placement, rights issue, or preferential allotment, different procedural conditions and disclosure requirements apply under Sections 42 and 62 of the Companies Act.

Why the Distinction Matters

A transfer simply moves existing ownership between two parties; the company’s total share capital doesn’t change. An allotment actually increases the company’s total share capital and can dilute existing shareholders unless they participate proportionately. Filing the wrong form, or filing under the wrong section, is a common compliance error that can complicate the company’s capital records later, particularly during due diligence for a future fundraise or sale.