Share Transfer Agreements

Share transfer agreements set out the conditions for the transfer of some or all of the shares in a company.  This can be the sale of the whole of the company or just part, to an unconnected buyer or to someone familiar or as part of a corporate reorganisation.

The share transfer agreement should be tailored to the unique circumstances of the situation. It is important to include the right warranties, indemnities and restrictive covenants to give protection to the person acquiring the shares.

At CWJ, our corporate solicitors have a high level of experience with share transfers. As well as ensuring that a sound share transfer agreement is in place, we also provide comprehensive advice on other related issues such as company structure, and draw in expertise from other disciplines such as property and employment, as well as liaising with other professionals.

Acquiring shares can mean taking on liabilities through the company and it is crucial to fully understand the implications of a share transfer before completing it. We can advise you of the commercial and financial considerations and also ensure that any necessary due diligence work is carried out in advance of the transfer.

Looking for more information? Please take a look at our share transfer agreement FAQs.

To discuss how our lawyers can help you, please contact us on 01689 887840 or fill in our enquiry form.

Our lawyers can assist with…

• Advice on the implications of a share transfer
• Negotiating initial terms and conditions of a share transfer
• Due diligence work
• Drafting or reviewing a comprehensive share transfer agreement
• Advice in respect of stamp duty on the transfer of shares
• Dealing with the completion of the share transfer, to include registration formalities and payment of stamp duty

Our share transfer agreements expertise

Our Corporate and Commercial team advise businesses in many sectors in respect of transferring shares. We have a strong commercial understanding and our advice always takes into account the position your business is in and your long-term aims. 

We are ranked for corporate and commercial work by the UK’s leading legal directory Chambers & Partners as one of the best in the Bromley region.

The team is headed by Partner Ben Madden who is recognised by Chambers & Partners as a leading practitioner in Bromley and Sussex for corporate finance work, including in the areas of investments and acquisitions.

Our fees

We have a high level of expertise and always aim to provide excellent value for money to our clients. We provide a clear estimate of the likely costs at the outset, with no hidden charges.

We charge on an hourly rate and will ensure that you have a lawyer with the right level of experience for your needs.

Share transfer agreements FAQs

What is a share transfer?

A share transfer is the transfer of shares from one person or entity to another, either by way of a sale or gift. Share transfers must be dealt with in the right way and it is important to follow the correct procedure.

What is the process of transferring shares?

Because liabilities will also be transferred with the company when shares are transferred, it is important to carry out due diligence beforehand. This will look at issues such as:

• Accounts
• Whether Companies House filing and HMRC filing is up to date
• Tax liabilities
• Whether the company has good legal title to the assets it holds, to include intellectual property rights
• The extent of any borrowing and security
• Any ongoing legal actions
• Money owed to the company, to include long-term and bad debt
• Employment matters and liabilities
• Whether any necessary licences and permits are in order
• What contracts the company has entered into and is bound to fulfil
• Property matters

How long does a share transfer take?

The process of transferring shares is relatively quick, however, the due diligence process can be lengthy and time must be taken to negotiate and prepare the transaction documents. The seller can put together much of the necessary information in advance if they anticipate selling shares, but a buyer and its advisers are likely to raise a substantial number of enquiries. Putting together paperwork in support of the replies can take a considerable amount of time.

The share transfer agreement will also need to be drafted and agreed. This will need to include clauses protecting the purchaser of shares from liability as far as possible.

How do I transfer shares in the UK?

The first stage is usually to enter into heads of agreement and a confidentiality agreement so that the company can release information in the due diligence process knowing that it is safeguarded.  The buyer may wish to have a period of exclusivity to negotiate freely without fear of another buyer becoming involved.

The due diligence process will need to be gone through using appropriate experts. As well as solicitors, this could also involve accountants or other financial experts.

A share transfer agreement will need to be negotiated. This will generally include the following key clauses:

• The details of the parties to the agreement
• The number of shares to be sold and the price to be paid
• How payment will be made, to include any deadlines if payment is to be made by instalments
• What will happen if a payment is not made
• Conditions of the sale
• How completion will take place, to include any resignations of existing directors
• Warranties, or statements made by the seller confirming that information supplied is true, for example in respect of accounts, bank statements, employment records, tax information, ownership of assets and disclosure of any ongoing legal action
• Indemnities, where the seller agrees to cover the cost of any claims that arose prior to the date of the share transfer, in specific identified areas, such as tax or environmental liability
• Restrictive covenants preventing the seller from taking certain actions such as setting up in competition, poaching staff, clients or customers or speaking negatively about the business

Once the due diligence work has been completed and the share transfer agreement drafted and negotiated, completion can take place.

The buyer will need to comply with the terms of the agreement in transferring funds for the shares. The seller will need to carry out their obligations under the agreement, which will include providing signed stock transfer forms and share certificates.

The buyer’s solicitor will generally deal with the completion process, including post-completion work such as registering director resignations and appointments with Companies House, paying stamp duty and registering the share transfers.

Can I transfer company shares to another person?

Company shares can be transferred to another person. It is often the case in relation to family businesses that shares are transferred to family members informally.

You are still strongly recommended to take legal advice before completing a transfer, however, as there may be tax and other implications to consider. It is beneficial to ensure that a company is structured in the most efficient way and in a way that protects directors and shareholders.

What documents do I need to transfer shares?

The following documents are usually put in place when company shares are transferred:

• Confidentiality agreement
• Agreement for the sale of shares
• Stock transfer form
• Directors’ approval of the share transfer
• Share certificate
• Updating of relevant registers kept by the company
• Updating Companies House records

How do I complete a transfer of shares in a limited company?

A stock transfer form needs to be completed showing how many shares are being transferred, the type of shares and what, if anything, is being paid.

Any stamp duty that is due should be paid to HMRC.

The completed form should be sent to HMRC for stamping.  Stamp Duty should be paid within 30 days of completion of the transfer or penalties and interest will be charged.

Once HMRC has stamped the form, it should be sent to the company with the share certificate for registration. You will then be issued with a new share certificate showing your share ownership.

How do I transfer shares from one company to another UK company?

A company can acquire shares from another company, for example, in restructuring or a merger. It is important to take legal and financial advice before agreeing to this, however, to ensure that the transaction is advisable and that tax and other implications have been fully considered.

The process of transferring shares will be broadly similar, with some due diligence work needed to ensure that the transfer is in the best interests of the company taking on the shares.

Do I need to pay stamp duty on transfer of shares?

Stamp duty on shares is generally payable at the rate of 0.5% on the purchase of shares that cost over £1,000, unless it is a new issue of shares.

Speak to our lawyers in Orpington, Bromley

If you are buying, selling or transferring shares, our expert lawyers can ensure that your rights and interests are protected and that you fully understand the implications of the transaction.

To discuss how our experts can help you, please contact us on 01689 887840 or fill in our enquiry form.