What is an Instrument of Transfer?
An Instrument of Transfer is a document necessary for transferring the legal title of the shares.
How to create an Instrument of Transfer
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Why is a Proper Instrument of Transfer needed?
A Proper Instrument of Transfer is a vital component of the share transfer process. Unless the share transfer is taking place via CREST (applicable for shares held in electronic rather than certificated form) or is exempt, a duly stamped Proper Instrument of Transfer must be delivered to the company whose shares are being transferred. Without this, the company cannot register the transfer, making it ineffective.
Is there a specific format for Instruments of Transfer?
Whilst companies can set their own specified forms of proper instruments of transfer, the most common form used is a Stock Transfer Form.
What information needs to be included in an Instrument of Transfer?
Zegal legal templates ensure you don’t miss vital information from your share transfer documents. Some important information to include in a Proper Instrument of Transfer is:
The parties involved
The identity (name and address) of the transferor and transferee forms a standard part of the Instrument of Transfer. If the shares are fully paid up, only the transferor will be required to sign the Instrument of Transfer. However, details of both parties must be included for the company’s future reference.
Details of the shares to be transferred
This includes the number of shares being transferred, their type and their class. This information can be found in the share certificates held by the transferor.
Method and amount of consideration paid
The price paid for the shares and what it will be paid in (for example, cash or other shares) must be detailed to enable any stamp duty liability to be calculated. If no consideration is to be paid for the shares (i.e. they are being gifted to the buyer) or if the amount of consideration is to be calculated in accordance with a separate document, such as a share purchase agreement, this will need to be stated.
Stamp duty considerations
If relief from stamp duty is being sought, details of this can be sent to HMRC separately to the Instrument of Transfer. However, if the transfer is exempt from stamp duty, the appropriate certificate will need to be completed and attached directly to the Instrument of Transfer. If stamp duty is to be paid, details of this payment can be included in the email sent to HMRC with the Instrument of Transfer attached (see ‘Can this process be done electronically?’ for more information).
How do I get the Instrument of Transfer stamped?
For the Instrument of Transfer to be ‘duly stamped’, stamp duty on the transfer must first be paid or the relevant exemption or relief claimed. Stamp duty liability arises during share transfers when the consideration for the shares is above £1,000. If such liability arises and no exemptions apply, the stamp duty sum must be paid to HMRC within 30 days of the date on which the Instrument of Transfer was signed.
Can this process be done electronically?
HMRC now accepts stamping requests electronically. All you have to do is complete the Instrument of Transfer (e-signatures will be accepted) and email it, along with any accompanying documents, to firstname.lastname@example.org. If stamp duty is to be paid on the transfer, this payment must be made first and details of it included in the email sent to HMRC.
HMRC will then issue you a confirmation letter, which acts as evidence that the Instrument of Transfer has been duly stamped. Typically, companies require the original Instrument of Transfer along with this confirmation letter to be posted to them, so that the original documentation can be retained as proof of the transfer. Therefore, whilst the stamping part of the transfer process can be completed electronically, the submission of the Instrument of Transfer to the company usually must still be done in a hard copy format.
What happens after I submit the Instrument of Transfer to the company?
Submission of the Instrument of Transfer does not guarantee the successful transfer of the shares. First, the company must approve the transfer, issue new share certificates/ cancel old ones, and amend their Register of Members. Once these changes have been made, the transfer is complete.
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