Share Transfer Process

Share transfer of a Company in Bangladesh
The process of transfer of shares is enumerated in the Company Act, 1994 (hereinafter “the
Act”), relevant regulations and circulars of the Registrar of Joint Stock Companies, and the
constituting documents of the Company (e.g. Articles of Association). Provisions of section
38 and 39 of the Act dictates that the transfer of shares of a company shall not be lawful
and valid unless -
Instrument of transfer duly stamped containing signatures of both the transferor and
transferee along with scrip be delivered to the Company;
The Directors accord approval to the transfer of shares; and
Registration of the transfer of shares by the Company and enter the name of the transferee
in the Company Register, by omitting the names of the transferor.
In practice, the process for transferring shares of a private company in Bangladesh includes
the following steps:
Due diligence (Evaluation of relevant documents)
Before getting into the process, the prospective purchaser/transferee should conduct due
diligence on the company documents, i.e. check and review the relevant documents. It is
often found that the Articles of Association (hereinafter, “the AOA”) of the Company
contains some restrictions on the transfer of shares. Other documents and agreements
including the Shareholders’ Agreement may also contain a restriction on the transfer of
shares. These restrictions are usually cleared by obtaining No Objection Certificates from
relevant stakeholders.
The most common form of restrictions in the AOA comes in the form of pre-emption, which
means that if a shareholder intends to sell some or all of his/her shares, such shares must
first be offered to other existing shareholders of the company at a valuation determined by
the Directors or the Auditor of the Company. Such shares are usually sold at an increased
price (adding a premium over the face value of the shares). Valuation of the Company may
also become an issue and therefore, the audited financial books should be checked to
confirm whether the valuation corresponds to the actual numbers stated in the books of
the Company.
It is also advisable to check for other forms of restrictions e.g. whether the Company has
bank loans or not, and obtained clearance from such bank (as required by section 27A of
the Banking Companies Act, 1991).
Corporate Approvals and documentation
The shareholder intending to transfer the shares should serve a formal notice (in writing)
to the Board of Directors of the Company (hereinafter “the Board”) about his/her plan to
transfer the shares. The Board has the absolute discretion to refuse the transfer of shares
as per section 38(7) of the Act. In general, the Board holds a board meeting (or EGM) to
approve the share transfer. Furthermore, the Board may also issue a NOC to acknowledge
that the pre-emption obligation has been fulfilled.
Payment of the Share price
Once step two is completed, the purchaser/transferee should make the payment for shares.
If both parties are Bangladeshi individuals or entities, then proof of payment of the prices is
not required. However, if the purchaser/transferee is a foreign national or entity and the
seller/transferor is local, then the Registrar (hereinafter “the RJSC”) shall ask for an
Encashment Certificate from the bank, showing that the Company has duly received the
payment for the shares. In such a scenario, the parties may need to comply with other
regulatory requirements set by the Bangladesh Bank.
Furthermore, if the transferee is a foreign national or Non-Resident Bangladeshi, the

transfer documents and affidavits in support of the transfer of shares must be consularised
(i.e. certified by the authorized officer of the Bangladesh Embassy/High Commission, and
counter-verified by the Ministry of Foreign Affairs and duly stamped by the Deputy
Commissioner), as per the newly amended section 38(3) (b) of the Act.
Execute Form 117 and payment of stamp duty
Once step three is completed, the transferring shareholder need to submit the required
documents including the list of directors, audited financial statements of the Company,
affidavit of share transfer, etc. and MUST visit the office of the Registrar (RJSC), as per the
newly amended section 38(3)(a) of the Act. The main instrument of share transfer i.e. Form
117 needs to be signed before the Registrar at RJSC. The presence of the transferor is,
therefore, mandatory. Although the law envisages commissioning options for those who
are otherwise unable to appear before the Registrar, it has not yet been implemented due
to logistical limitations as of February 2023.
Stamp duty is payable on the face value of each share. The rate is 1.5% of the value of the
shares. Once Form 117 is signed, a copy of the signed Form should be delivered to the
Company.
Amendment of the Company Register and Issuance of Share Certificate
Once all the above steps are done, the Company needs to update its share registrar, share
transfer registrar, and minutes registrar and issue a share certificate in favor of the new
shareholder or amend the existing share certificate to reflect the changes.
What documents are usually essential:
1. Form 117, duly filled out;

2. An affidavit by the transferor/seller;
3. Board Resolution by the company in an EGM approving the transfer of the shares;
and
4. Certificate of Transfer of Shares.
5. No-Objection Certificates (if applicable)
6. Letter of Resignation from the Board of Directors (if applicable)
7. Letter of Authorization (if applicable)
In case of disputes
In case of disputed transfer or the allegations of fraud, error or undue influence, or

misrepresentation, the affected party(s) may apply to the Company Court (i.e. High Court
Division) under section 43 of the Act for rectification of share register i.e. to overturn the
disputed transfer of shares. The Court has a wide discretion to scrutinize the matter upon
examining necessary evidence adduced by the parties.

Share Transfer Process

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Share transfer of a Company in Bangladesh

The Directors accord approval to the transfer of shares; and

Due diligence (Evaluation of relevant documents)

Corporate Approvals and documentation

Payment of the Share price

Furthermore, if the transferee is a foreign national or Non-Resident Bangladeshi, the

Execute Form 117 and payment of stamp duty

What documents are usually essential:

1. Form 117, duly filled out;

In case of disputed transfer or the allegations of fraud, error or undue influence, or

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