How do share transfers work in an Australian company?
A share transfer is the process by which ownership of shares in a company moves from one person or entity to another. In a proprietary company, share transfers are governed by the company’s constitution (or the replaceable rules if no constitution has been adopted), and must be documented and lodged with ASIC.
If the company’s constitution contains pre-emption rights, which most well-drafted constitutions do, the existing shareholders have the first right to acquire the shares before they can be offered to a third party. The transfer process typically involves the transferor and transferee executing a share transfer form, the board of directors passing a resolution to approve (or refuse) the transfer, and the company updating its register of members.
Once the transfer is approved and the register updated, the company must notify ASIC of the change in shareholding by lodging a Form 484 within 28 days. The company should also cancel the existing share certificate and issue a new certificate to the transferee. Duty on ordinary share transfers has been abolished, but landholder duty can apply if the company or its subsidiaries hold land above the relevant threshold, assessed in the state or territory where the land is located.
It is important to consider the tax implications of a share transfer. The transfer may trigger a capital gains tax (CGT) event for the transferor. If no consideration is paid, or the parties are not dealing with each other at arm’s length (common between family members and related entities), the market value substitution rule can treat the transferor as receiving market value for the shares, whatever was actually paid. Professional tax advice should be obtained before any transfer.
CoSec Partners prepares all share transfer documentation including the transfer form, board resolution, updated register of members, new share certificates, and the ASIC Form 484 lodgement.
Frequently asked questions
How long do I have to tell ASIC about a share transfer?
Twenty-eight days from the change. The notification is made on a Form 484. Lodging outside that window attracts a late lodgement fee under ASIC’s two-tier schedule, which increases once the lodgement is more than one month overdue, and the fee applies per occurrence.
Do the directors have to approve a share transfer?
Usually yes. Most constitutions require the board to approve a transfer and give the directors a discretion to refuse registration in defined circumstances. Where the constitution contains pre-emption rights, existing shareholders must generally be offered the shares before they can go to an outside party.
Is stamp duty payable on transferring shares in a private company?
It depends on the jurisdiction and on what the company owns. All states and territories have abolished duty on ordinary transfers of unlisted shares, but landholder duty provisions can apply where the company holds significant land. Confirm the position with a duty adviser before completing a transfer of any material value.
What is the difference between a share transfer and a share allotment?
A transfer moves existing shares between holders and leaves total share capital unchanged. An allotment creates new shares and issues them, increasing total share capital and diluting existing holders. Both are notified to ASIC on a Form 484, but the paperwork behind them is different.
This article is general information only and does not constitute legal, financial, or tax advice. While we endeavour to keep content accurate and current, laws and regulations change frequently. For advice specific to your circumstances, please consult a qualified professional adviser. CoSec Partners Pty Ltd accepts no liability for actions taken based on this content.