Shares can be transferred, either to another shareholder (or new investor) or back to the company itself. Of course, the process will differ depending on the entity or person to whom a person sells their shares. This article details how to transfer shares to another shareholder or back to the company.

Tranferring to Another Shareholder

When a shareholder sells their shares to another shareholder or new investor, the sale process typically requires a:

  • share sale agreement;
  • resolution of shareholders;
  • resolution of the board;
  • share transfer form; and 
  • share certificate.

A share sale agreement is a formal document that details the terms and conditions of the sale. It must be clear and comprehensive and provide information about the number of shares for sale and the price paid. It should also outline when and where the sale will take place and whether the purchaser will pay in instalments or one transaction. As a vendor, you must make all appropriate warranties to the buyer.

If the company’s shareholders’ agreement provides members with the ‘right of first refusal’, you may need the consent of other shareholders (depending on the purchaser’s identity) before the transfer can take place. The right of first refusal requires a member wishing to sell their shares to offer them first to other shareholders. Members can consent in writing to the sale or pass a unanimous resolution approving the sale. When they do so, they waive their right.

Similarly, if the company constitution requires the consent of the board before a share transfer can take place, you need the board to meet and approve the transfer. The resolution must be recorded in the minutes of the meeting.

Once the purchase has taken place, you must provide the buyer with a signed share transfer form. You must also ensure that the company cancels your share certificate and issues a new one in the purchasers’ name. Only then do they become a member. 

Finally, if you are a director of the company in which you are selling shares, you must resign before or at the time of the sale. The company must also notify the Australian Securities and Investment Commission (ASIC). ASIC requires a company to submit Form 484 within twenty-eight days.

Transferring Back to the Company

The company must undertake a share buyback to effect the transfer. If a company intends to acquire its own shares, it must satisfy all necessary formalities. These vary depending on the kind of buyback, but it may involve receiving shareholder assent in a general meeting as well as the consent of the board in a meeting. The company must also notify ASIC. The company will then send relevant shareholders a shareholder buyback agreement that outlines the conditions.

Although it’s particular contents will depend on the nature of the buyback as well as the type of company and industry, standard clauses include:

  • company obligations;
  • details of completion;
  • vendor warranties; and
  • indemnities and releases.

In the agreement, the company will outline its obligations. These refer to the price the company will pay for the shares and how they will make payment.

For example, a company could pay for the shares in one transaction or several instalments. If a company intends to pay in instalments, the agreement should include a detailed schedule for those payments.  

Exchange and Completion

Similarly, the agreement should outline details regarding exchange and completion. The exchange occurs when the parties sign the agreement and completion when the transfer takes places. The dates for exchange and completion may differ. The provision concerning completion should outline when it will happen and that the company will pay a specified amount for the shares. It will also list the tasks that a member must do. These could include giving a letter of resignation and returning any company documents in their possession.

The document will also outline the warranties that the vendor makes to the company upon completion. The precise nature of these warranties will differ between agreements but will likely include an assurance that the seller owns the shares legally and beneficially, and that you have the right to sell them. You will also need to affirm that there are no encumbrances on the shares and that transferring them breaches no third party agreement.

The company will indemnify the vendor against any future claims made against the company and release you from all of its current and future liabilities. In turn, the agreement will provide that the vendor releases the company from any claims it may have against the company and that you are settling all such claims through payment for your shares.

Other Documents

There might be additional documentation to complete the share buyback process. It will depend on the company, the type of buyback and the vendor. For example, a seller who is also a company director will need to provide a letter of resignation. After completion, the company cancels the shares and notifies ASIC accordingly.

Key Takeaways

To affect a share sale and transfer, ensure that you comply with the methods of transfer as set out in the Act. If you have any questions about transferring your shares back to the company, or if your company is considering a share buyback, get in touch with LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.
Carole Hemingway

Get a Free Quote Now

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • We will be in touch shortly with a quote. By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.

Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at info@legalvision.com.au

View Privacy Policy