Share transfer
The sale, gift, or other transfer of shares from one holder to another. Triggers register updates, certificate cancellation and reissuance, and sometimes board or shareholder approval.
| Transfer agreement | Signed by transferor and transferee |
|---|---|
| Certificate | Old certificate cancelled, new certificate issued to transferee |
| Share register | Entry recording the transfer, dated to the day it took effect |
| Board approval | Often required by bylaws for private corporations |
The complete transfer workflow
A properly executed share transfer involves more than just signing a document. The full workflow:
- Confirm transfer restrictions. Check the bylaws, shareholder agreement, and articles for any ROFR, tag-along, or approval requirements. Resolve each one before signing.
- Execute the transfer agreement. Transferor and transferee sign. The agreement should identify the shares (class, number, certificate numbers), the consideration, any representations and warranties, and the effective date.
- Obtain required approvals. Board resolution, shareholder consent, or other approvals required by the bylaws or shareholder agreement.
- Cancel the existing certificate. The transferor surrenders the existing share certificate, which is cancelled and filed in the minute book.
- Issue a new certificate. A new certificate is issued to the transferee for the transferred shares. If the transferor retained any shares, a new certificate is also issued to them for the retained shares.
- Update the share register. A register entry is made dated to the effective date of the transfer, recording the cancellation of the prior entry and the creation of the new one.
- File supporting documents in the minute book. Transfer agreement, board resolution, cancelled and reissued certificates, register entry.
How transfers quietly corrupt records
The most common failure mode in private corporations is incomplete transfer workflow. A transfer agreement is signed but no certificate is issued. A new certificate is issued but the register is never updated. A board resolution authorizing the transfer is drafted but not signed. Multiply these gaps over five or ten years of transfers and the register no longer reflects who actually owns the corporation.
The gap surfaces in diligence, in financing, or in a dispute. By then, reconstructing the ownership history requires interviews with parties who may no longer be reachable, document forensics, and sometimes litigation.
Special cases
Some share transfers carry additional requirements:
- Founder transfers typically trigger reverse-vesting clauses: unvested shares are repurchased by the corporation, only vested shares transfer.
- Secondary sales of preferred shares may trigger ROFR rights held by the corporation and other preferred holders.
- Cross-border transfers may have tax implications (departure tax, withholding tax) and securities-law implications (registration exemptions).
- Transfers to or from trusts require attention to who appears on the register as the legal holder versus the beneficial owner.
Octelligence enforces the complete transfer workflow: ROFR check, board resolution, certificate cancellation and reissuance, and share register update. The transfer doesn't close until each step does, and the activity log captures every action.
See share transfer workflowROFR check, board resolution, certificate cancellation, register update, nothing skipped.