How can a Director sell or transfer his share ?

Limited company shares can be transferred or sold just like any other form of property. The need to do so can arise for many reasons, for example, the retirement or death of a shareholder, recouping an investment, gifting shares to family members, raising additional capital or bringing in a new business partner.

A stock transfer form must be completed to legally transfer ownership from the existing shareholder to someone else. There is no need to notify Companies House at that time – the changes will be reported on the next annual confirmation statement (previously called an annual return). You may, however, have to notify HMRC if Stamp Duty is due.

In many companies, the articles of association may stipulate that shares may only be sold or given to an existing member, or a family member of an existing shareholder. The articles may also express the company’s right to buy back any available shares. If you have a shareholder’s agreement, it may include certain conditions with regards selling shares.

Complete a stock transfer form, How?

The following information must be stated on the stock transfer form stock_transfer_form (download):

  • Company name and registration number.
  • Number and class (type) of shares being transferred.
  • An amount paid or due to be paid for the shares, if applicable.
  • Details of any non-cash payments, if applicable.
  • Name and address of existing owner (transferor).
  • Name and address of new owner (transferee).
  • Authorizing signature of both parties.
  • Declaration of Stamp Duty liability, if any.

Directors can approve transfers if they are granted this power in the articles of association. Otherwise, transfers must be approved by the existing members. Both the transferor and transferee should be given a copy of the stock transfer form. A share certificate should also be issued to the new shareholder.

The company must retain copies of all transfer forms and certificates at its registered office address or SAIL address. The statutory register of members should also be updated.

Stamp Duty on shares

Stamp duty is payable on company shares transferred for a sum in excess of £1,000. The Stamp Duty is payable by the new shareholder at a rate of 0.5% of the sale value. No Stamp Duty is payable if the value of the shares transferred is less than £1,000, or shares that are transferred as a gift.


Prior to selling of gifting shares, you must check the articles of association and shareholders’ agreement (if applicable) for any restrictions, such as:

  • Pre-emption rights of existing shareholders.
  • The directors’ power to authorise share transfers.
  • Buy-back options of the company.
  • The restriction of transfers to family members.

Shareholders do have the authority to amend the articles and shareholders’ agreement to include, remove, or change these restrictions. To do so, a special resolution must be passed.

Protect members rights

Pre-emption rights is a provision that protects members’ rights by preventing the unfair dilution of their shares. This would reduce their percentage of ownership, thus the amount of control they have and their profit entitlement. When pre-emption rights exist, you have to offer available shares to existing members before offering them to non-members. The percentage offered to them should be in relation to their current percentage of ownership. This enables existing owners to buy the available shares, maintain their existing percentage and prevent the potentially harmful influence of outside investors.

Power of Director

Some companies allow their directors to authorise transfers. But many firms only allow shareholders to deal with shares. It is entirely up to the owners of the company which powers they wish to grant their directors. Ultimately, directors are appointed to make decisions on behalf of, and for the benefit of, shareholders. If a director has no power to authorise a transfer, the members will have to pass a resolution to authorise the transfer or grant the necessary powers to the director on that occasion.

Notify Companies House about share transfers

There is no immediate requirement to notify Companies House when shares are transferred. You will provide this information on the next confirmation statement. You will also provide details of any new shareholders at the same time. However, you can update your confirmation statement if you wish to report changes sooner. Companies House will then update the public register when this information is received.