When you buy shares in a company, you become an owner to the extent of your purchase. Because of this, you share in the company’s profits through dividends payouts or share price increases. On the flip side, when companies do not succeed, you share in their losses with share price decreases. Over time, you may look to cash in on your investment, or become unhappy with how the company is being run. When this occurs, you may think about disposing of shares through sale or share transfer. Transferring shares in a proprietary company is different from transferring shares in a public company. This article explains these differences and procedures.
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Public Companies
Public company ownership in Australia is organised through shares of stock. These are traded on the Australian Stock Exchange (ASX).
Selling Shares
Selling shares in publicly listed companies must occur through an ASX participant broker. This stockbroker charges a fee to act as your agent in selling your shares to someone else.
‘Off-market’ transfer of shares
Transferring shares in a public company is different from buying and selling shares because it occurs ‘off-market’ without the use of a stockbroker. Commonly, off-market share transfers occur between family members or as a result of deceased estates. The Transfer Form for Non-Market Transactions is used to make these transfers.
Moving to a different broker
If you wish to move your shares to a different trading platform, requirements vary depending on what the new trading platform is. Generally, however, you must complete a Clearing House Electronic Subregister System (CHESS) sponsor form. This will allow you to transfer all or some of your existing holdings to another trading platform.
Private Companies
Private companies differ from public companies. They have shareholders and often issue shares. However, these shares are not publicly issued or traded on the ASX. In addition, private companies may have no more than 50 non-employee shareholders.
With this in mind, it is fair to suggest private companies are often smaller than their public counterparts. Because of this, different regulatory requirements apply. It is possible to sell shares for money or transfer to others free of charge, however, disposing of shares in private companies must comply with the company’s Shareholder Rules, Constitution, and provisions set out in the Corporations Act. As there is no public share market for private companies, share disposals may be more difficult to execute, as you may not be able to find a buyer for the shares you own.
Share sales/transfers
In transferring shares in a proprietary company, you must ensure your actions comply with the relevant rules and legislation. This includes the following considerations;
- Compliance with the Company Constitution – Generally, the constitution stipulates whether permission must be sought to sell your shares. If there is no company constitution, the replaceable rules apply. Importantly, these reinforce that directors have the right to refuse a transfer of shares for any reason.
- Who the shares are sold to – Companies may require you to first offer the shares to other shareholders. If they decline to purchase any/some of the shares, you may offer the shares to third parties as the directors permit.
- Share Transfer Form – When transferring shares, it is essential to use a share transfer form. This form details the transfer of shares according to the terms of the Company Constitution, the acceptance of the transfer, and the payment of the purchasing price. You can obtain a share transfer form here.
- Shareholder’s Agreement – aside from the Company Constitution and Share Transfer Form, you must also ensure you comply with the Shareholder’s Agreement. This agreement details your rights and responsibilities as a shareholder.
If you have any questions regarding this share disposal process, obtain the help of a business lawyer to guide you through the process.
Notification requirements
If the share transfer occurs smoothly, private companies must file the change in ownership with ASIC within 28 days after their
If approved, ownership changes must be filed with ASIC within 28 days after the shareholder register has been updated. This requirement is for private companies. For more information on how to do this, visit the ASIC website.
Key Takeaways
- The process for disposing shares is different between public and private companies.
- In private companies, the use of a Share Transfer Form and compliance with key company documents and the Corporations Act is essential.
- If you need assistance with transferring shares, contact a business lawyer.
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