You are planning to transfer shares in a UK company that issues paper share certificates (known as “certificated shares”).

This note explains, in straightforward terms, how that process works, what documents are needed and the main legal and tax points to be aware of.

1. Can the shares be transferred?

Shares in a UK company are generally transferable, but the company’s articles of association and any shareholders’ agreement may place limits on who you can transfer to and the process that must be followed. Common restrictions include directors’ powers to refuse a transfer, rights of existing shareholders to be offered the shares first (pre-emption rights) and prohibitions on transfers to certain buyers such as competitors. Before proceeding, the articles and any shareholders’ agreement should be checked so that any conditions (such as offering the shares to existing shareholders first, or obtaining shareholder consent) are either complied with or formally waived.

For some sensitive sectors, the National Security and Investment Act 2021 can require prior government clearance if a buyer is acquiring certain levels of shares or voting rights; in those cases, completion without approval can be void and have serious consequences. Your specific deal should be checked against that regime where relevant.

2. Key stages in a share transfer

In a typical private company share sale, the process follows four main stages.

• The seller and buyer agree the terms of the sale, usually in a share purchase agreement that deals with price, warranties, any earn out or deferred consideration and post completion obligations. For very simple, low value or intra-group transfers, the parties may in some cases be comfortable to proceed without a full written agreement, but that is not usual for commercial transactions.
• The seller signs a stock transfer form in favour of the buyer. This is the standard form used for transferring fully paid certificated shares under UK law.
• The signed form is submitted for stamp duty (if payable), now done electronically with HMRC. Once HMRC has processed payment, it issues a confirmation letter that the instrument has been duly stamped.
• The company’s board considers the transfer. If the directors approve it in accordance with the articles, the buyer is entered in the register of members and issued with a new share certificate within the statutory two month period.

Legal ownership of the shares only passes when the buyer is registered as a member in the company’s register (or on the central register at Companies House, if the company uses that option).

3. Beneficial ownership and timing issues

Although legal title changes only on registration, the economic or “beneficial” ownership of the shares often passes earlier, typically at completion of the sale once there is a binding, enforceable contract. From that point, the seller normally holds the shares on trust for the buyer until registration, which has consequences: dividends that arise should be passed to the buyer and voting rights should be exercised at the buyer’s direction (assuming the price has been paid and the parties have not agreed otherwise).

Because the company is not required to recognise trusts, it will still treat the registered holder as the shareholder until the transfer is registered. To protect the buyer during that period, it is common to include clear contractual provisions in the share purchase agreement about who controls voting and how dividends and other rights are dealt with, or to have the seller grant the buyer a power of attorney to exercise rights attached to the shares pending registration.

4. Company records and Companies House

Once the board approves the transfer, the company must update its internal records and, in some cases, file information at Companies House.

• Register of members: The company must update its register of members as soon as practicable and in any event within two months of the transfer being lodged, removing the seller for the transferred shares and adding the buyer.
• People with Significant Control (PSC): Share transfers can change who has “significant control” (for example, who holds more than 25% of the shares or voting rights), and the company has duties to investigate and to notify Companies House of any new, changed or ceased PSCs within the required deadlines. These PSC obligations look at beneficial ownership and control, so updates can be needed even before legal title is registered if control has effectively passed to the buyer.

Failure to keep these records up to date or to make required filings is a criminal offence for the company and its officers.

5. Stamp duty and tax points

A transfer of certificated shares for more than £1,000 consideration usually attracts stamp duty at 0.5% of the price, rounded up to the nearest £5, unless a specific exemption applies. In practice, the buyer almost always pays this duty, and the stock transfer form must be submitted to HMRC electronically with payment details so HMRC can issue a confirmation of stamping. The company should not register the transfer or issue a new share certificate until it has seen HMRC’s confirmation (or evidence that an exemption applies).

For the seller, a disposal of shares can give rise to capital gains tax (for individuals) or corporation tax on chargeable gains (for companies), subject to any reliefs and exemptions and subject to the possibility in some cases that a gain is taxed as income. The detailed tax position will depend on the seller’s circumstances, the nature of the company and any applicable reliefs, so specific tax advice should be taken before proceeding.

Thinking of transferring shares?

Before you sign anything, it’s worth checking the articles, shareholder agreements and tax position to avoid delays or invalid transfers. If you’d like a practical sense-check or support with the documents and process, feel free to get in touch with us at contact@impactlawyers.co.uk.