Transfer shares
What is a share transfer? A share transfer is the process by which shares can be transferred from an existing shareholder to someone else. Therefore the total share capital does not change – just the ownership of the shares. This is, obviously, different to a share issue – where the company creates and issues new shares – ie the share capital increases.
Shares are usually transferred for money (i.e. bought and sold), but they do not have to be – you can gift shares.
Can you process a share transfer using Kudocs? Yes – you can use Kudocs to perform the entire share transfer process (including deeds of adherence for new shareholders, stock transfer forms, new share certificates, etc), or you can just record the outcome, and still use Kudocs to complete the admin.
Will Kudocs generate Stock Transfer Forms for me? Yes in draft or the final document. This applies in the perform and record routes.
Will Kudocs submit Stock Transfer Forms to HMRC for me? Unfortunately not… You still need to submit that offline directly to HMRC.
Does Kudocs calculate if stamp duty is payable, and if so, how much? Yes, we will automatically calculate if stamp duty is payable by the recipient (if they are paying more than £1,000 for the shares) and how much is payable (0.5%, rounded up to the nearest £5).
When should a share transfer be added to the company registers? A company can only record a share transfer in its registers once the stamp duty position has been clarified – either no stamp duty is payable, or HMRC returns stamped STFs (Form J30) confirming that all duty has been paid. While the beneficial (or equitable) title in the shares passes when the transferor and transferee agree that is has happened (e.g. when the SPA is signed), the legal title in the shares only passes once the company’s registers are updated to reflect the transfer.
What happens if the company needs to file a confirmation statement before HMRC has returned the STFs – should that include the details of the share transfer? The short answer is no.
HMRC can take quite a while to stamp and return STFs and therefore it is not uncommon for a share transfer to be ‘in limbo’ between the share transfer agreement (when the beneficial (or equitable) title in the shares passes between transferor and transferee) and when the share transfer can be legally recorded in the company registers. The confirmation statement (CS01) requires details of shareholders who have legal ownership of shares, not beneficial ownership. Therefore, in the case where a share transfer is ‘in limbo’ waiting for HMRC to return the stamped STFs, the share transfer should not show in the confirmation statement – as only the beneficial interest has passed at that stage.
The basis for this is:
- Section 112 of the Companies Act 2006 states that a person only becomes a member (shareholder) of a company if their name is entered in the company’s register of members. This confirms that legal ownership is determined by the register of members, not by beneficial ownership.
- Section 113 of the Companies Act 2006 specifies the details of what is needed in the register of members, which includes only legal shareholders.
- Section 123 of the Companies Act 2006 explicitly states that a company’s register of members must not include details of trusts or beneficial ownership.
- Section 853A of the Companies Act 2006 states that the confirmation statement must confirm that shareholder information is correct and reflects the register of members.
As the register of members can only contain legal shareholders, the confirmation statement must also only contain details of legal shareholders.