Transferring Jointly Owned Shares In The UK

Introduction

Jointly owned shares often involve shared responsibilities, but circumstances may arise where one co-owner decides to transfer their legal ownership to the other(s). Whether due to changing priorities, financial considerations, tax considerations or personal reasons, understanding the legal process for transferring jointly owned shares in the UK is crucial. In this blog, we will delve into the steps involved, the legal intricacies, and the essential documents required for a seamless transfer of ownership.

Transfer Process

The process generally involves a combination of reviewing the company’s constitution (shareholders agreement and articles of association) and producing, as necessary, board resolutions, written shareholder resolutions, stock transfer form(s) and share certificate(s).

1. Agreement Between Joint Owners:

Before initiating the legal process, the joint owners should come to a mutual agreement regarding the share transfer. This may involve negotiations on the terms, price, and other relevant conditions.

2. Review of Company Articles of Association:

It’s essential to review the company’s articles of association to understand any specific provisions related to share transfers. Some companies may have pre-emption rights on a transfer of shares, which give existing shareholders the first option to purchase the shares before they are transferred to another party.

3. Shareholder Agreement:

If there is a shareholder agreement in place, it should be consulted for any additional terms or conditions regarding share transfers. This document often outlines the procedures and restrictions associated with the transfer of shares.

4. Board Resolution:

The board of directors must pass a resolution approving the share transfer. This resolution should be recorded in the minutes of a board meeting, clearly stating the details of the transfer, including the names of the parties involved, the number of shares, and any other relevant information, such as the class of shares.

5. Written Shareholder Resolutions:

If there are pre-emption rights or other specific provisions regarding the process of transferring shares contained within the company’s constitution then written shareholder resolutions will need to be passed by at least 75% of the company’s shareholders. These resolutions would usually contain information regarding the number of shares to which the transfer relates and the class of shares.

6. Stock Transfer Form:

The legal transfer of shares is typically executed through a stock transfer form. This document must be completed, signed, and stamped (see step 7 below). It includes details such as the names of the transferor(s) and transferee(s), the number and class of shares being transferred, and any consideration involved.

In any event, each of the joint owners (even the party receiving the transferred legal ownership) will need to execute the stock transfer form as a transferor.

The legal transfer of shares is typically executed through a stock transfer form. This document must be completed, signed, and stamped (see step 7 below). It includes details such as the names of the transferor(s) and transferee(s), the number and class of shares being transferred, and any consideration involved.

In any event, each of the joint owners (even the party receiving the transferred legal ownership) will need to execute the stock transfer form as a transferor.

7. Stamp Duty:

Stamp duty may be applicable on the transfer of shares, depending on the value of the consideration (value greater than £1,000) or the type of shares. It’s essential to check the current stamp duty rates and ensure compliance with the applicable regulations.

8. Update Company Records:

Once the transfer is complete, the company’s records, including the register of members, must be updated to reflect the change in ownership. This is a legal requirement and helps maintain accurate and up-to-date corporate records.

The company will also need to update Companies House as necessary. Most typically, the company may need to update its persons of significant control and/or file a new confirmation statement setting out the new owners of the transferred shares.

Conclusion

Transferring jointly owned shares involves a structured legal process to ensure compliance with company law in the UK. From reaching an agreement between joint owners to obtaining board approval, shareholder approval, completing the stock transfer form, and updating company records, each step is crucial for a smooth and legally sound transfer.

The above is a simple breakdown of the usual steps which will need to be undertaken to affect a transfer of jointly owned shares, however in consideration of the company’s constitution it will become clearer if there are additional steps to be considered.

If you would like to understand more about the process of transferring legal ownership in jointly owned shares, our experienced solicitors can help. For most new matters, we offer a 20-minute introductory call to find out more and discuss the issues before providing you with a relevant fee quote.

Please email wewillhelp@jonathanlea.net providing us with any relevant information so we can ensure that any call we have with you is as productive as possible.

This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited 2024.