How to Transfer Shares in a Corporation Properly (Philippines)

Transferring shares in a corporation may sound complicated, but it’s actually a straightforward process if you follow the right steps. Whether you’re selling shares, transferring ownership to a partner, or restructuring your business, it’s important to do it properly to avoid legal and tax issues.

This guide breaks everything down in a clear and easy-to-understand way.

What Does “Transfer of Shares” Mean?

A share transfer happens when ownership of shares moves from one person (the seller or transferor) to another (the buyer or transferee).

Once completed, the new owner gains rights such as:

• Voting in corporate decisions

• Receiving dividends

• Participating in the company

  
  

Why Proper Transfer Matters

You can’t just “agree” to transfer shares it must be officially recorded.

If the transfer is not recorded in the company’s Stock and Transfer Book (STB), the corporation will still recognize the old owner.

Proper transfer ensures:

• Legal ownership is clear

• No disputes between shareholders

• Compliance with corporate and tax rules

  
  

Basic Requirements for Share Transfer

To transfer shares properly, you’ll need the following:

1. Stock Certificate

The original stock certificate must be signed at the back by the current owner.

2. Deed of Sale or Assignment

This document proves the transfer. It should include:

• Names of buyer and seller

• Number of shares

• Purchase price (if applicable)

  
  

3. Tax Payment (DST)

You must pay Documentary Stamp Tax (DST) to the BIR.

4. Company Approval (if required)

Some companies require approval based on their bylaws or agreements.

Step-by-Step Process

Here’s how the process usually works:

Step 1: Prepare and Sign Documents

Execute the Deed of Sale or Assignment.

Step 2: Endorse the Stock Certificate

The seller signs the back of the certificate.

Step 3: Pay Taxes

File and pay the Documentary Stamp Tax with the BIR.

Step 4: Submit to the Corporation

Provide all documents to the company.

Step 5: Record the Transfer

The company records the transfer in the Stock and Transfer Book.

Step 6: Issue New Certificate

A new stock certificate is issued in the name of the new owner.

Important Tips to Remember

✔ Always check if there are restrictions (e.g., right of first refusal)

✔ Make sure all documents are complete and properly signed

✔ Don’t skip tax compliance to avoid penalties

✔ Keep copies of all documents for your records

Common Mistakes to Avoid

• Not recording the transfer in the company books

• Missing or incomplete documents

• Not paying DST

• Ignoring company rules

  
  

These mistakes can delay or invalidate the transfer.

Final Thoughts

Transferring shares in a corporation is more than just a simple agreement it’s a process that requires proper documentation, tax compliance, and official recording.

By following the correct steps, you can ensure a smooth, valid, and hassle-free transfer.