Business Advice, Investing

Guide To Completing A Stock Transfer Form

Allison S Robinson | 12 September 2022 | 2 years ago

how to complete a stock transfer form

Investing in stocks and shares can be very lucrative if you buy and sell at the right times. According to UK law, stocks and shares are objects of property and, as with any other property, they can be sold or given away. Stocks were created as a way of allowing a collective of people to invest in a business by way of purchasing shares in the company. In order to be an appealing investment, the shares needed to be transferable, so that the investors can sell the shares to redeem their value.

Transferring stocks and shares is done with a stock transfer form, and while the process is relatively simple, it is important to know how to do it properly so that you pay the necessary stamp duty and avoid any mistakes.

In this article, we will discuss everything you need to know about how to complete a stock transfer form to ensure that your trading goes without a hitch.

What Are Stock and Shares?

Simply put, a share is a single unit of ownership in a company. Companies will issue shares to raise capital in order to operate and grow their business. In return, the shareholders own units of equity in the company and are eligible to receive dividends or capital gains should the value of the company increase. To make money investing in shares, the old adage “buy low, sell high” is what you need to achieve.

In the UK, there are 3 primary types of shares issued by companies to shareholders; Ordinary, Preference, and Redeemable. These different types of shares have some similarities but are fundamentally unique from each other. Shares can even be divided into smaller sub-groups called

‘Classes’. There are advantages to distributing multiple types of shares for both businesses as well as investors, such as providing the versatility to return capital to shareholders (other than via a dividend) and minimising investor risk.

stock markets

What Is A Stock Transfer?

A stock transfer is a process of transferring ownership of shares from one person to another. It is a formal document called a stock transfer form that is used to record the change in ownership and should be signed by both the buyer and the seller. The form must also be dated and include information about the type of shares being transferred, how many are being transferred, as well as the names and addresses of both parties involved.

It is important to note that a stock transfer is different from a share certificate. A stock transfer form is used to change the ownership of shares, whereas a share certificate is simply proof that an individual owns shares in a company.

Stamp Duty on Stock Transfers

If you use a stock transfer to purchase stocks and shares for £1,000 or less you will generally not have to pay any Stamp Duty but if the value of the shares is more than £1,000 you will have to pay 0.5% of the total value as Stamp Duty.

Should a transfer be exempt from Stamp Duty, or there is no chargeable consideration, the purchaser is required to complete one of the two certificates on the back of the stock transfer form:

Certificate 1

Complete Certificate 1 if the consideration given for the shares is less than £1,000 and is also not part of a larger or series of transactions. Simply put, this certifies that the value is less than £1,000. The purchaser or their legal representative should sign the certificate.

Certificate 2

Complete Certificate 2 of the stock transfer form in the following situations where stamp duty is not chargeable:

  • Shares are received as a gift.
  • Shares are transferred from a spouse or civil partner when married or entering into a civil partnership. Likewise, if a marriage or partnership is dissolved.
  • Shares are transferred as collateral for a loan or transferred back when the loan has been prepared.
  • Shares that are transferred by a liquidator as part of a settlement to shareholders should a company be wound up.
If any of the conditions listed above apply and the consideration for the shares is declared as nil on the stock transfer form, neither certificate needs to be completed and the stock transfer form does not need to be sent to HMRC as there will be no stamp duty to pay.

What Are The Reasons To Perform A Stock Transfer?

There are many reasons businesses and investors choose to transfer stock. These include:

  • In exchange for cash payment
  • To write off debt payments
  • Transferring shares on behalf of an existing shareholder
  • Individual shareholders holding excess shares
  • In exchange for goods or services
  • Passing on the family business by gifting shares to family members
  • Transferring between business partners
  • A company changing its corporate structure
  • Tax purposes

What Is The Procedure for Share Transfers?

  1. The shareholder, in this case, called the transferor, shall provide the transferee with a completed and signed stock transfer form and the share certificate of the shares that are to be transferred.
  2. The transferee must have the transfer stamped by paying all necessary stamp duty and then sending the stock transfer form and the share certificate to the company. It is illegal for a company to register a transfer of shares before a stamped and proper instrument of transfer has been submitted to it, or the transfer is an exempt transfer within the Stock Transfer Act 1982. This applies notwithstanding anything in the company’s articles.
  3. Once the form has been submitted, the company makes a decision whether to accept or reject the transfer. Provided the secretary has been authorised in advance by the board to accept transfers, this decision shall be made by a resolution of the directors. Barring a provision in its articles that constrains transfers or gives the board the option to decline them, the company is required to accept the transfer.  If a company declines to register a transfer, it is obligated to send a notice of refusal to the transferee within 2 months of the date on which the transfer was requested. (See Companies Act 2006, sec177)
  4. Should the transfer is admitted by the company, the company shall make all requisite entries in the register of members and the register of transfers, should the company have one, and then issue a share certificate to the transferee. As with the notice of rejection, the company must provide the certificate within 2 months of the original filing date.
  5. The company will keep the stock transfer form and the original share certificate. The original share certificate must have ‘Cancelled’ stamped or written across to prevent it from unintentionally being reissued. No form or notice is required to be sent to Companies House.
  6. Should the shareholder only want to transfer a portion of their shares, the transferee may not wish to part with the share certificate for the greater amount of shares. In this case, the transferor could solicit the company for split certificates or a “certificated transfer”. This is a stock transfer form certificated by the company confirming that the certificate has been submitted.
  7. The identities or details of one or more people who have significant control of the company may be exposed by the transfer. Usually, this is where an individual becomes, or stops being, the bearer of more than 25% of the voting shares. Any changes in the details are required to be entered on the company’s PSC register and the Companies House is required to be informed.
  8. Once the transfer form has been submitted, HMRC will process it in 15 to 20 working days. If information is missing or incorrect, or more information is needed for processing, they will contact the relevant parties stated on the form.
stock charts

Filling out the Stock Transfer Form

If the transferor wishes to transfer fully paid shares the J30 stock transfer form should be used. This is the most common type of transfer. Occasionally, a party may wish to transfer unpaid or partly paid shares. In this instance, the transferor will use the J10 form instead.

It’s customary practice to fill out a stock transfer form in BLOCK CAPITALS and to use black ink. If a mistake is made on the form, do not use any correction fluid or labels, simply cross it out, make the change and initial it or start again. The following information is required when you fill out the transfer form:

Consideration Money

When the shares are being transferred for cash, the total amount of money being paid must be entered. If there is no money being paid for the shares, state ‘NIL’ in lieu.

Full Name Of Undertaking

State the company name in which the shares are being held.

Full Description Of Security

Declare the type or class of shares to be transferred. For instance, ordinary shares of £5.00. If uncertain, look at the original share certificate of these shares. All necessary information can be found there.

Number Or Amount Of Shares, Stock Or Other Security

Here is where the total number of shares being transferred shall be stated. They must be stated in both figures and words. Should the stock be bundled into units, the number of units must be specified.

Names and Addresses Of All Registered Shareholders

Insert the name of the current shareholder(s). Joint shareholders must also be listed by name, should there be any. Regardless of how many shareholders there are, only one address shall be entered. In the case of a joint shareholding, only the address of the first-named shareholder is required. If an executor is completing the form on behalf of a transferor, the faculty in which they are signing the form must be stated. Enter any account designation or reference in this section if necessary.

Signature(s)

This section is where the signature of the person transferring the shares is completed. Generally, this will be the seller or sellers, seeing as all joint holders are required to sign, but there are some circumstances where alternatives may sign stock transfer forms:

  • Legal personal representatives signing on the behalf of the estate of a deceased shareholder
  • A Power of Attorney has been registered with the company. In this instance, the attorney is permitted to sign on the behalf of the seller
  • A corporate shareholder registered in England, Wales or Northern Ireland that stipulates a combination of officers must sign. Individual officers must state the capacity in which they sign and that they are signing for the company.

Names and Addresses of Person(s) Receiving the Shares

Insert the details of the transferees in whose name(s) the shares will now be registered. If joint shareholdings are proposed, the name of each joint shareholder must be included. For joint shareholdings, only enter the address of the first-named shareholder. This will be the address to which communications in regards to the shares will be sent.

The goal will usually be to register the shares in the name of a corporate or other entity instead of an individual. Nonetheless, transfers will usually only be registered if the receiving party is a private limited company, public limited company, incorporated by a special act of Parliament, incorporated under the Royal Charter, or under any applicable foreign company law. This will mean that shares may be transferred to the underlying persons or trustees that are involved with a trust, association, charity, or club instead of to the entity itself.

Stamp Or Name And Address Of Person Lodging The Stock Transfer Form

Should a party wish to send the new share certificate to someone besides the first-named person receiving the shares as stated, their name and address should be entered in this section.

It is preferred that the stock transfer form be emailed, and not posted to the HMRC. For a transfer request to be completed, email a copy of the stock transfer form or instrument of transfer to stampdutymailbox@hmrc.gov.uk. If the person is unable to email the form, they can still post it to the HMRC.

transferring stocks

Final Thoughts

Although it may seem a daunting task for those unfamiliar with the process, completing a stock transfer form is a relatively straightforward process. We hope that this guide has given you more understanding of how to complete a stock transfer form. Good luck with your investments!

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