Moveable or immovable property can be transferred voluntarily and without consideration by way of Gift under Section 122 of the Transfer of Property Act, 1882. The person who transfers the moveable or immovable property is called the Donor. The person receiving the transfer is the Donee.
Section 2 (84) of the Companies Act, 2013 defines shares as a share in a company's share capital, which also includes stock. On scrutinizing Section 2 (36) of the General Clause Act, 1897, which states movable property shall mean property of every description, except immovable property, we can conclude Shares are movable property. Further, the provision of Section 2(7) of the Sales of Goods Act, 1930 defines the term 'goods' as every kind of moveable property other than actionable claims and money. Goods also include stock and shares, growing crops, grass, and things attached to or forming part of the land, which are agreed to be severed before or under the contract of sale.
Under Section 123 of the Transfer of Property Act, 1882 a gift of moveable property may be transferred by a registered instrument signed or by delivery. Shares of a company incorporated in India or outside India can be gifted as prescribed under the rules and procedures of the Companies Act, 2013 and other legislations.
The Companies Act, 2013 prescribes the following procedure Gift of shares:
A Gift Deed has to be prepared for the transfer of Equity Shares or Preference Shares;
The Gift Deed has to be delivered along with share certificates by Donor in favour of Donee;
The Gift Deed above should be accepted by or on behalf of Donee;
Execution of Form SH-4 and payment of an adequate amount of stamp duty on the Gift Deed;
Within 60 days from the date of execution, Donor or Donee are to deliver the transfer documents to the Company;
The Company shall within one month from the receipt of transfer documents call a Board meeting, and by a Board Resolution to be passed for transfer of shares by way of Gift;
Further, within one month, the Company should deliver the share transfer certificate.
The transfer of shares is subject to Stamp duty, and the provisions of Article 62 (a), Schedule I of Indian Stamp Act, 1899 are applicable. The transferee to pay stamp duty at the rate of Rs 0.25 for every Rs 100 of the value of the share, and for share transfers, special adhesive stamps bearing the word “share transfer” shall be used for stamping. To determine the valuation of shares, the average market value of shares of a private Company shall be considered and for a listed company, the same can be determined from the stock exchange.
It is pertinent to also note that a Gift received by the Donee will not be taxable if the Donor is a relative which includes spouse, children, etc. However, the Gift of shares from persons other than relatives would be taxable under the provisions of the Income Tax Act.
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