On an acquisition of shares, what is the process for effecting the transfer of the shares and are transfer taxes payable?

Private Equity

Austria Small Flag Austria

The transfer of, and every offer to transfer, title to shares in a limited liability company (GmbH) requires a purchase or other transfer agreement drawn up in the form of an Austrian (or German; for other jurisdictions a case-by-case analysis is required) notarial deed. The registration of the new shareholder in the companies register has only declaratory effect. The transfer of title to registered shares in a stock corporation (AG) requires handing over of the duly endorsed share certificates. Where no share certificates are issued, an assignment agreement is sufficient. To be recognised as a shareholder and be able to exercise shareholder rights in a stock corporation, registration in the share ledger (Aktienbuch) (which is effected by the management board on application of the purchaser) is required. Bearer shares can only be issued where the issuer is listed (or is to be listed pursuant to the articles of association). The transfer of title to bearer shares requires matching purchase and sell orders and book order entry. Consent requirements and transfer restrictions may apply.

There are no transfer taxes levied in Austria.


The transfer of shares is exempt from VAT.

Real estate transfer tax

Austrian real estate transfer tax is triggered if at least 95% of the shares of a company that directly holds Austrian real estate (or similar rights) are consolidated in the hands of one shareholder (Anteilsvereinigung), which could be the case by purchasing at least 95% of the shares or by purchasing a smaller stake that together with shares already held by the purchaser add up to 95% or more. Furthermore, if within a period of five years, 95% or more of the partnership interests of a partnership that directly holds real estate (or similar rights) are transferred, this triggers real estate transfer tax (this can include several transactions with different purchasers). In each case the real estate transfer tax amounts to 0.5% of the real estate value (Grundstückswert) of the real estate. Shares held by trustees are to be attributed to the trustor for purposes of calculating the 95% threshold. If Austrian real estate is transferred by way of a reorganisation (Umgründung) that qualifies for the benefits of the Reorganisation Tax Act (UmgrStG), the real estate transfer tax will likewise be 0.5% of the real estate value of the real estate. The real estate value has to be calculated either (i) under a certain formula taking into account the proportional ground and building value or (ii) in reference to an appropriate real estate price index.

Until a recent tax reform, real estate transfer tax could be avoided by transferring a minority interest to a third party to avoid consolidation of all shares. Austrian tax authorities sometimes challenged this structure as being abusive where the size of the minority interest was notional, trust or similar arrangements were in place or other comparable circumstances justifying a "look through" for tax purposes. Under the new regime, the minority interest must exceed 5% and it is not possible anymore to use a trustee for such purposes.

Reorganisation Tax Act

Certain share purchases can be structured as a merger, a spin-off or a contribution in kind, in which case the transaction may be eligible for the benefits available under the Reorganisation Tax Act (UmgrStG), in particular a roll-over treatment. In general, such roll-over treatment may be applied with retroactive effect for tax purposes of up to nine month (typically with respect to a balance sheet day in the past). If the transaction qualifies under the UmgrStG, transfer taxes can also under certain conditions be avoided or reduced. These conditions depend on the type of reorganisation. For domestic reorganisations, they include, among others:

• A proper documentation including the required balance sheets.

• Timely filing of the reorganisation (in some cases with the companies register, in others with the competent tax office).

• In case of a contribution in kind or a spin-off also the transfer of qualified assets (for example a business unit or a qualified stake of shares representing at least 25% of the share capital or ensuring together with shares already held by the acquiring company a majority in the share capital of the company that shares of which are being transferred).

• Minimum holding periods for certain items.

• Various other formal requirements.
For cross-border or foreign reorganisations further requirements apply, for example, the comparability of the foreign corporation and of the foreign reorganisation.

Income tax

Capital gains resulting from a sale of shares in a corporation generally are subject to tax in Austria. The rate of applicable income tax is 25% if the seller is a corporate entity and 27.5% if the seller is an individual. Capital gains from a sale of shares in a company that is not resident in Austria for tax purposes do not increase the tax base for corporate income tax purposes if the shareholding qualifies for the Austrian international participation exemption and the seller has not opted out of tax neutral treatment of capital gains. There is no comparable exemption for capital gains from a sale of shares in a corporation that is resident in Austria. On the other hand, dividends distributed by the Austrian target will be tax exempt for the recipient in the legal form of a corporation. Accordingly, it is common to distribute any accrued profits before the sale.

At the shareholder level capital gains taxation will depend on whether the sellers are domestic or foreign residents. In case of foreign resident shareholders such capital gains taxation only applies if their participation in the Austrian target amounted to at least 1% in the last five years. However, tax treaties usually restrict the right of Austria to tax such capital gains, as Article 13(5) of the OECD Model Tax Convention, which is followed by most treaties concluded by Austria, assigns the right to tax such capital gains to the state of residence of the shareholder (unless a special provision for real estate companies applies).

The exemption from corporate income tax is denied if a structure is considered generally abusive, or certain criteria under statutory tests indicating that they are abusive are met.

Austria levies stamp duty on certain transactions, including:

• Leases (at a rate of 1%);

• Assignments (at a rate of 0.8%);

• Settlements (at a rate of 1% or 2%);

• Easements (at a rate of 2%);

• Sureties (at a rate of 1%);

• Mortgages (at a rate of 1%).

Stamp duty is generally only triggered if a written deed (Urkunde) on the transaction or referring to the transaction is signed in Austria. Under certain limited circumstances stamp duty is also triggered if the deed is signed outside of Austria. If stamp duty was avoided by signing a written deed outside of Austria, the later import of that deed (or a certified copy) into Austria as well as any documentary proof (rechtsbezeugende Urkunde) like correspondence from an to Austria referring to the transaction (including emails) may trigger stamp duty. The Austrian tax authorities take a broad view of what constitutes a "deed" and accordingly triggers stamp duty and therefore avoidance schemes must be carefully structured.

Japan Small Flag Japan

The process for effecting the share transfer differs depending on whether the target is a listed or unlisted company, and, if it is an unlisted company, whether the target issues share certificates or not. An unlisted company will not issue share certificates unless it elects to issue them in its articles of incorporation.

With respect to a target unlisted company that does not issue share certificates, the transfer of shares in the target becomes effective pursuant to the agreement between a seller and a buyer without any mandatory actions under law, provided that the share transfer becomes perfected against the target and third parties only when the buyer is recorded as the shareholder in the target’s shareholder registry. The shareholder registry can be updated by the joint request of the buyer and seller to the target, and such written request executed by the seller will be typically part of the closing deliverables for the share transfer.

With respect to a target unlisted company that does issue share certificates, the transfer of shares in the target becomes effective only if and when the share certificates representing the transferred shares of the target are delivered from the seller to the buyer. In order to perfect the share transfer, the shareholder registry of the target must also be updated as in the case for an unlisted company that does not issue share certificates, but the request to update the shareholder registry of the target can be made by the sole request of the buyer in which the buyer presents to the target the share certificates delivered from the seller. Therefore, the share certificates representing the transferred shares must be part of the closing deliverables for the share transfer.

In addition, a transfer of shares in an unlisted company (regardless of whether it issues share certificates) is usually subject to certain transfer restrictions set out in the company’s articles of incorporation, and approval by a resolution of a meeting of the company’s shareholders or board will be required.

With respect to a listed company, all of its shares are managed under the book-entry transfer system. The share transfer only becomes effective when the transfer is recorded in the book entry account of the buyer. Such transfer will be registered at the buyer’s account by the seller’s request to the account management institution (e.g., securities company) where the seller’s account is maintained.

No transfer tax is applicable to any transfer of shares in a Japanese company.

Mauritius Small Flag Mauritius

Transfer of shares in a Mauritius company is governed by the Companies Act 2001. A share transfer becomes effective upon the relevant entry made in the share register of the company. The entry can be made by the Company upon receipt of a valid instrument of transfer.

The company is required to forthwith file with the Registrar a certified copy of the instrument of transfer.

There is no capital gains tax under the laws of Mauritius and therefore capital gains derived from the sale of shares and other securities are outside the scope of Income Tax. However, income derived from the sale of shares and securities which have been held in the course of business of trading in such instruments represents profits and are taxable except gains derived by companies holding a Category 1 Global Business Licence which are exempt under the law.

Any gains derived from sale of shares and other securities by an individual resident in Mauritius are considered as capital gains and therefore not subject to income tax. Any gains derived by a company resident in Mauritius from sale of shares and other securities held for a period of at least 6 months prior to the sale by the company are considered as tax exempt capital gains. The taxation of gains derived by the company from the sale of shares and other securities held for a period of less than 6 months will depend on the nature of business the company is involved in. Where shares or other securities are held by the company as fixed assets, gains from sale of such assets are treated as capital gains. Any gains derived by a non-resident from sale of securities in Mauritius are treated as not taxable as non-residents from treaty partners do not generally have a permanent establishment in Mauritius to trade in shares in Mauritius. They rather deal in securities from their own country of residence.

Norway Small Flag Norway

Upon completion of an acquisition of shares, the title to and ownership of the shares are transferred from the seller to the buyer by way of entering the buyer into the target company's shareholders' register as owner of such shares. Such register is held by the target company itself and no public registration is required.

If the target company's shares are electronically registered in the VPS (the Norwegian Central Securities Depository), the title to and ownership of the shares are transferred from the seller to the buyer by way of transferring such shares from the seller's VPS account to the buyer's VPS account.

There are no stamp duties or other transfer taxes payable in Norway in connection with transfer of shares in a Norwegian private limited company or a Norwegian public limited company. Further, there is no requirement to notarize the transfer of the shares.

Switzerland Small Flag Switzerland

To transfer the shares of a (private) Swiss company limited by shares, a share purchase agreement between seller and buyer setting out the obligations to sell and purchase as well as further contractual terms of the transfer is required. In order to effect the transfer of the ownership in such shares at the closing of the share purchase agreement the following additional steps are required: In case no physical shares or share certificates are issued, a written assignment agreement between seller and buyer as well as a board resolution approving the transfer (if articles of association contain a transfer restriction regarding the registered shares) is required. In case physical shares or share certificates are issued, it is required that seller delivers to buyer such shares or share certificates, duly endorsed to buyer, together with a board resolution approving the transfer (in case of a transfer restriction). Securities transfer tax is payable on the sale of (Swiss or foreign) shares if a Swiss securities dealer is party to the agreement or is involved as intermediary and amounts to up to 0.15% for Swiss shares and 0.3% for foreign shares (if no exemption applies).

The Netherlands Small Flag The Netherlands

Process for effecting the transfer of the shares

The transfer of registered shares in the capital of a Dutch limited liability company or a public company (unless such shares are listed on an official stock market) requires the execution of a deed of transfer between the transferor and the transferee before a Dutch civil law notary. Unless the company itself is party to the notarial deed of transfer for acknowledgement of the transfer (which is usually the case), the rights pertaining to such shares can only be exercised after the company has acknowledged the transfer of the shares or the notarial deed of transfer has been formally served to the company by a court bailiff.

To avoid the necessity for parties to travel to the Netherlands, the deed of transfer can be executed on the basis of powers of attorney. The civil law notary executing the deed will require certain specific signing and KYC requirements to be met. The notary will require the power of attorney to be provided with a legalization (notarization) statement and furnished with an apostille of the Hague Convention of October 5th, 1961 or a similar procedure if the country involved is not a member of the Hague Convention. Subsequently an apostille can be obtained from the Secretary of State where such notary is registered (note that in certain states, an intermediate confirmation through the County Clerk must be obtained).

In addition, in case foreign entities are a party to the deed of transfer, the notary will require a statement of a notary practicing in the relevant jurisdiction or a lawyer admitted to the relevant bar confirming the authority of the signatories to the power of attorney to represent such legal entity.

In the Netherlands, it is common practice that the purchase price for the shares is paid into the third party account of the notary who will execute the deed of transfer. Such notary will hold the purchase price on behalf of the buyer until the execution of the deed of transfer (which is the moment that the legal title to the shares passes to the buyer) and following execution of the deed of transfer it will hold the purchase price on behalf of the seller(s). In case a refinancing of the target will take place on completion this funds flow will normally also run through the third party notary account. The notary, the buyer, the seller(s), the existing lenders and the new lenders mostly enter into a notary letter in which the arrangements with respect to the flow of funds and release and vesting of security are laid down.

No transfer taxes payable

The acquisition of shares in a company is in principle not subject to Dutch value added tax or Dutch transfer taxes. However, Dutch real estate transfer tax at a rate of 6 per cent (or 2 per cent if it concerns residential real estate) is levied on the acquisition of shares or similar rights in a ‘real estate company’ (i.e., a company the assets of which consist of more than 50 per cent of real estate, whether Dutch or foreign, and at least 30 per cent of those assets is Dutch real estate, provided such real estate is or was mainly used at that time for the acquisition, sale or exploitation of such real estate), if the buyer, together with its affiliates, acquires or extends an interest of one-third or more in such company.

Certain exemptions are available. The Netherlands does not levy stamp duty or similar taxes of a documentary nature.

United Kingdom Small Flag United Kingdom

For all English companies, the process for effecting the transfer of the shares requires the transfer of legal title to the shares and , if the transfer value is in excess of £1,000, the payment of a stamp duty transfer tax by or on behalf of the purchaser to the UK tax authority (which is currently a rate of 0.5% of the price paid for the shares).

In a private company context where shares are in certificated form, the process would customarily involve the seller executing a pro-forma stock transfer form which the purchaser would then submit to the UK tax authority within 30 days of the transfer alongside the transfer tax payment. Once the form is stamped by the tax authority then the target company would update its share register to record the transfer. At that point, legal title to the transfers would have transferred to the purchaser. Given the time gap between the signing of the form and the updating of the register, the customary method of ensuring that the purchaser can exercise its rights as a shareholder in the target company in this period is by the grant of a power of attorney from the seller to the purchaser to enable it to vote on shareholder resolutions in the name of the seller.

In a public company context, shares are usually held in uncertificated form and transferred through an electronic clearance system (e.g.CREST). CREST maintains an electronic register of members (usually financial institutions who are then holding the shares on behalf of the relevant investors) and trades are effected electronically by CREST transferring the ownership in the shares once it has received the payment for the transfer (including the transfer tax payable).

The stamp duty transfer tax is legally borne by the purchaser and in the UK market this liability is not customarily shared or passed back to the seller. Failure to pay the transfer tax within 30 days of the transfer results in penalties and interest and prevents the purchaser from being able to register itself in the company’s register of members and enforcing its rights as a shareholder in a UK court (in either case unless and until paid).

Belgium Small Flag Belgium

Process for effecting the transfer of the shares

The formalities for effecting the transfer of shares under Belgian law are limited, and depend on the type of shares.

Shares in a Belgian limited liability company (BVBA/SPRL or NV/SA) are usually registered, and the ownership of these shares must be recorded in the company’s share register. Title to registered shares is evidenced by their registration in the company’s share register. Consequently, at closing, the transfer of registered shares is perfected by recording such transfer in the company’s share register. Usually parties grant a power of attorney to their local counsel to effectuate this.

Shares in a Belgian NV/SA can also be issued in dematerialized form, although we almost never encounter dematerialized shares in M&A transactions involving a financial sponsor.

No transfer taxes payable

There is no transfer tax, registration duty or stamp duty due on the sale of shares in a Belgian company, even if the company’s sole assets consist of real estate. In principle, stock exchange tax may be due in respect of listed securities (normally at a rate of 0.27 percent). This tax is only due following the intervention of a professional financial intermediary, which is typically not the case in a M&A context.

China Small Flag China

For all Chinese companies, the process for effecting the transfer of the shares to non-Chinese investors requires registrations with the State Administration for Market Regulation (“SAMR”) and the Ministry of Commerce (“MOFCOM”) or their respective competent local counterparts. Additionally, a pre-transaction MOFCOM approval is required for a non-Chinese investor’s acquisition of the shares in a domestic company engaging in a categorized business under the Special Administrative Measures for Foreign Investment Access (“Negative List”). A categorized business under the Negative List refers to a business in which foreign investment is restricted (e.g. telecommunications, insurance, securities brokerage) or prohibited (e.g. media, compulsory education, tobacco distribution).

In a private company context, the equity interest in a company is is usually evidenced with a business license specifying the registered capital amount of a company and the transfer process would customarily involve the parties executing a share transfer agreement. The seller would then submit the agreement to the Chinese tax authority within 7 days of the completion of the transfer and pay applicable Chinese taxes, including a withholding tax at a rate up to 10% on capital gains realized by a non-PRC tax resident seller (the tax basis for which is usually the company’s registered capital amount or the seller’s investment cost) and a stamp duty of 0.1% (which is equally shared by the purchaser and the seller).

In a public company context, shares are usually held in uncertificated form and transferred through electronic clearance systems maintained by China Securities Depository and Clearing Corporation (“CSDC”). CSDC maintains an electronic register of members and trades are effected electronically by CSDC transferring the ownership in the shares once it has received the payment for the transfer (including the transfer tax payable). Selling listed shares is subject to a stamp duty at a rate of 0.1% borne by sellers.

A PRC tax resident seller, for a transfer of shares in either a private or public company, is required to report a sale transaction in its monthly or quarterly corporate income tax filings and pay applicable corporate income taxes at a rate of 25%.

Finland Small Flag Finland

Under Finnish law, the following steps are required to transfer title to shares in a private limited liability company: (i) corporate resolutions by the vendor and the acquirer to approve and enter into the relevant share transfer agreements; (ii) agreement between the vendor and the acquirer regarding the transfer of the shares; (iii) if share certificates have been issued, the share certificates must be physically transferred (duly endorsed) into the possession of the acquirer to perfect the relevant share transfer; and (iv) update of the shareholder register of the target company. There is no public register of shareholdings in private companies and, thus, there are not as such any related perfection requirements in Finland.

If at least one of the transaction parties is a Finnish resident for tax purposes, a transfer tax of 1.6% of the purchase price is levied on the purchase of shares in a Finnish limited liability company. If the target company is treated as a ‘real estate company’ for tax purposes, i.e. more than 50% of its business activity comprises owning and managing real estate, the transfer tax is 2% of the purchase price. The buyer customarily pays transfer taxes.

France Small Flag France

The process for effecting the transfer of the shares differs from one legal form of company to another. In the vast majority of cases, the transfer of the shares only requires an update of the share ledger and shareholders accounts of the target company. In such a case, the shares are recorded in the share register as owned by the purchaser. In other situations, which are very rare in practice, the transfer of the target’s shares will require an update of the articles of association of the company.

Any transfer of shares in a French company (or any transfer of shares evidenced by an instrument executed in France) will trigger registration or stamp duties the amount of which depends on (i) the business and the legal form of the target company and (ii) the value of the transaction.

The simplified joint stock company (société par actions simplifiée) is the most common vehicle on the French market. Subject to certain exceptions, the transfer of its shares should trigger a tax registration fee equal to 0.1% of the fair market value.

Germany Small Flag Germany

The process for effecting the transfer of the shares depends on the type of the relevant target entity, i.e. private or publically listed stock corporation (Aktiengesellschaft) or limited liability company (Gesellschaft mit beschränkter Haftung).

As for a publically listed stock corporation, the takeover of a target company whose shares are listed in Germany is primarily governed by the German Securities Takeover Act. The German Securities Takeover Act provides for a formal takeover procedure and sets a strict timetable in which the bidder and the target have to publish certain documents, inter alia, an offer to all shareholders to acquire their shares in the target company.

Shares in a private German stock corporation, in principle, can be freely transferred. To the extent that share certificates are issued, the transfer is subject to the regulations under applicable securities laws. If no share certificate is issued, the shares can be transferred by assignment of the shares. However, in case of registered shares, the transfer of the shares requires an agreement between seller and purchaser by way of endorsement.

Shares in a German limited liability company are validly acquired by the execution of a share purchase agreement notarized by a German notary.

Generally, a transfer of shares is exempt from German VAT (unless seller opts for VAT which is very uncommon for share deals). If the sold entity owns German real property (or rights treated as real property under German civil law), such transfer may trigger German real estate transfer tax depending on the purchaser’s acquiring structure and this is a cost that is borne by the purchaser.

Greece Small Flag Greece

There are two legal aspects in relation to a transfer of shares of a société anonyme: (a) the actual transfer; and (b) the recognition by the company of the transferee as the new shareholder. The actual transfer of non-listed shares is being effected by an agreement between the parties and delivery of the shares. Subsequently, the transfer is registered in the company’s books and signed by the parties (as per applicable legislation the Company recognizes as shareholder only the person registered in its books). It should be noted however that, pursuant to L. 4548/2018 which introduces major changes in the société anonyme legal framework beginning from January 1st 2019, the above mentioned registration is not required if the company receives a copy of the transfer agreement or takes knowledge of the transfer by any other means. As a final step, the Company denotates the transfer to the transferred shares’ Share Certificates or issues new ones. As a matter of practice, the above steps are performed simultaneously on a predetermined closing day and time. Listed shares may be transferred either through trading in the market they are listed to, or over the counter, in which case a transfer agreement is required. Transfer of non-listed shares in a dematerialized form, or listed shares is registered to the Dematerialized Securities System.

A 15% capital gains tax is imposed to the transfer of shares (such tax not being applicable to any transfer of listed shares, originally acquired by the transferor after January 1st 2009, provided that the transferor’s shareholding to the company is less than 0,5%). Tax is not paid on the time of the transaction; instead it is declared by the transferor in its annual tax return.

Ireland Small Flag Ireland

The transfer of shares in an Irish company must be:

i. evidenced in writing
ii. must be signed by the transferor and, in the case of shares which are not fully paid, or an unlimited company, the transferee.

Stamp duty at a rate of 1% is payable on the acquisition of shares. There is no stamp duty on the issue of new shares. In certain cases, where the shares derive their value or the greater part of their value from Irish non-residential land or buildings, the rate of stamp duty is 6%. In addition, where the consideration for the purchase of shares includes the discharge of debt, it is chargeable to stamp duty.

In situations where the consideration cannot be ascertained, and the transfer would otherwise attract duty by reference to the amount of the consideration, duty is charged on the market value of the property. This may arise in circumstances where there is a working capital adjustment after the execution of the instrument which would add to or subtract from total consideration.

Luxembourg Small Flag Luxembourg

The process for effecting the transfer of shares depends on the type of corporate entity involved and the form of shares.

In Luxembourg public limited liability companies (sociétés anonymes), partnerships limited by shares (sociétés en commandite par actions) and private limited liability companies (sociétés à responsabilité limitée), shares are typically in registered form with ownership being recorded in a share register maintained at the registered office of the company.
For private limited liability companies (sociétés à responsabilité limitée), the shareholders are also registered with the Luxembourg Trade and Companies Register (Registre de Commerce et des Sociétés) and any change in ownership must be notified to and published with such register.

Bearer shares are limited in application due to the requirements to deposit samewith a recognised depositary.

Transfers of registered shares are recorded by way of private share transfer agreements and there is no requirement for such share transfers to be notarised.

In private limited liability companies (sociétés à responsabilité limitée), share transfers to non-shareholders must first be approved by shareholders holding at least 75% of the shares in the capital of the company (which threshold can be lowered to 50% in the articles of association of the company). There is no such mandatory prior shareholder approval required by law for share transfers in other corporate entities.

There are no transfer taxes (stamp duty or otherwise) payable on the sale of shares in a Luxembourg company.

Russia Small Flag Russia

Completion of a transaction prior to clearance by FAS may lead to the same consequenc-es, i.e. potential administrative penalties and avoidance of the transaction, as conducting a transaction in the complete absence of clearance. It is in principle possible to carve out Russian shares or assets from a global transaction, if the structure of the transaction per-mits.
In addition, there is an option for intra-group transactions that allows to submit a subse-quent notification instead of an application for prior approval, provided that a group chart is submitted to FAS prior to implementing the transaction. The main disadvantages are: (i) no changes of the group are permitted other than the transaction to be filed, and (ii) the transaction cannot be completed within one month from the date of submission of such group chart (1-month waiting period).

Poland Small Flag Poland

For a limited liability company, a transfer of shares must be effected in writing with signatures certified by a notary.

In addition, the articles of association may stipulate that a transfer of shares is be subject to the consent of the company or otherwise restricted. In these cases a relevant consent must be obtained.

The transfer of shares must also be notified to the company concerned by the parties involved and proof of the transfer must be presented to the company.

The transfer of shares must also be reported by the management board of the company concerned to the registry court.

In case of a joint-stock company, the requirements regarding a transfer of shares depend on the type of shares being transferred, i.e. if they are registered shares or bearer shares.

In case of registered shares, their transfer must be effected by way of a written declaration either in the share certificates or in a separate instrument, and must require the transfer of possession of the shares.

In case of bearer shares, the transfer of rights related to them requires the hand-over of the share instrument.

A tax on civil law transactions in case of the sale of shares amounts to 1% of the market value of the shares.

The obligation to pay arises at the time of performance of civil law transaction, i.e. at the time of entering into the sale agreement – unless certain exceptions apply (for example sale of the shares effected through brokers is exempted from tax on civil law transactions).

Portugal Small Flag Portugal

The process for effecting the transfer of the shares, besides the execution of an agreement (which does not have to be in writing although it usually is, but with no additional formalities), is:

a) If the shares are represented by share certificates: (i) the endorsement of the share certificates and (ii) the registration of the transfer in the shares issue book;
b) If the shares are in bearer-form: (i) the registration of the debit in the securities account of the transferor and (ii) the registration of the credit in the securities account of the transferee.

Other procedural actions may be required depending on existing contractual limitations to the transfer of shares, as set out under the company by-laws or other agreements.

There is no transfer tax in the acquisition of shares. However, the balance between capital gains and losses in the sale of shares is subject to taxation: at a rate of 21 per cent, for resident corporate entities (surtaxes may apply), or 28 per cent, for individuals (capital gains income may also be subsumed within the remainder of the subject’s personal income, resulting in the application of progressive tax brackets, up to a 48 per cent rate which may be accrued of special “solidarity rates”).

Capital gains by non-resident individual persons shall be exempt provided that: (i) such individuals are not domiciled in a jurisdiction subject to a favorable tax regime (i.e. in a “blacklisted jurisdiction”, as determined under applicable regulations) and (ii) the assets of the company which equity participations are sold are not made up in over 50 per cent of real estate assets located in Portugal. If not exempt, these capital gains are taxed at a special rate of 28 per cent.

Capital gains by non-resident companies are subject to tax at a rate of 25 per cent but may be exempt if certain conditions are complied with (such as the entity not being held in over 25% by Portuguese resident entities or the ultimate beneficial owner of the former not being an entity resident in a blacklisted jurisdiction).

Sweden Small Flag Sweden

The transfer is effective (i.e. the buyer obtains the right in rem in relation to the shares and is able to exercise all rights pertaining to the shares) when the buyer is entered in the target company’s share register as owner of the shares. In those cases where share certificates representing the shares have been issued, the transfer is fully effected when the certificates have been endorsed and transferred to the buyer.

There are no Swedish transfer taxes applicable to a transfer of shares.

United States Small Flag United States

The stock purchase agreement and accompanying stock power are the documents which evidence the transfer of stock in private limited liability corporations.

The U.S. does not have any transfer tax on stock transfers.

Malta Small Flag Malta

The transfer of shares in a Maltese company becomes legally effective from the moment when it is validly entered into the Register of Members of the company in question. The Board of Directors of the company is ultimately responsible for the registration of share transfers in the company’s register of members. This register is generally maintained and administered by the Company Secretary.

In the course of registering a share transfer with a Maltese company, the Directors would undertake the process by examining whether or not the transfer of shares is impaired in any manner. Such impairments would typically include one or more of the following considerations:

- pre-emption rights restricting the transfer of shares. Such rights can be duly waived by the holders of that right either by way of a declaration or letter, or in the form of a members’ resolution;

- contractual restriction/s that may affect the transferability of the shares, such as lock-in provisions in a shareholders’ or investment agreement. Whether or not these restrictions can be managed or waived will very much depend on the circumstances;

- Any third-party approval/s or authorisations to which the valid transfer of shares may be subject. Practical examples of such approvals or authorisations could include:

  • ex ante regulatory approvals (applicable in the case where the company in which a shareholding interest is to be transferred operates in a regulated sector and holds a formal licence, authorization or approval),
  • governmental authorizations in respect of companies that own, manage or operate nationally strategic assets, or
  • the approval of the holder of a security right (e.g. pledgee) registered over some or all of the shares that form the object of the proposed share transfer;

- Class rights that could be adversely affected by the share transfer and which may require specific management.

In the case of Maltese private limited liability companies, it is typical that the Articles of Association contain language to the effect that the Directors of the company may effectively refuse to register the share transfer if they do not approve of the acquiring shareholder. For this reason, it is advisable to have a Directors’ resolution as a condition precedent to the share transfer in terms of which the Board of Directors acknowledges the proposed share transfer and irrevocably undertakes to register the purchaser in the register of members once the sale is duly perfected by the parties and the shares legally pass from the seller to the purchaser. It is clearly in the purchaser’s interest to seek this resolution to eliminate any obstacle to the registration of the share transfer by the company in an orderly and timely manner.

Malta operates a central public Companies Register and any and all changes to a Maltese company’s registered details and documents (including share transfers) must be duly recorded with the Register, in terms of law. Therefore within 14 days from the effective date of transfer of the shares in a Maltese company, a Director, Company Secretary or Manager of the company must submit the appropriate statutory form (Form T) to register the transfer of shares with the Registrar of Companies. Failure to register the share transfer does not invalidate any share transfer duly recorded in the register of Members of the company, but it does trigger a penalty for failure to submit notice of the share transfer within the 14-day statutory period, and an additional penalty for each day that the default subsists.

Transfers of shares in Maltese companies are generally subject to Capital Gains Tax (“CGT”), paid by the seller, and Duty on Documents and Transfers (“DDT”), paid by the purchaser. There are however various exceptions from both CGT and DDT that apply for the benefit of persons who are not tax resident in Malta and which could apply where the company does not hold immovable property in Malta. The procedure for calculating, reporting and settling these taxes and duties are typically undertaken by an audit firm or tax practitioner and is based on the basis of self-assessment.

India Small Flag India

In relation to transfer of shares, the primary questions that would need to be addressed would involve examining the place of residence of purchaser and seller, the sector in which the target company operates, and process set out in the charter documents of the target company. The final process of transfer would depend upon the answers to these questions.

In a private limited company, the shares are usually held in physical form and would require execution of a prescribed form by the parties. Such form is then stamped @0.025% of the transaction value and submitted to the target company for registration. The board of the target company approves the transfer and records the same in a statutory register called “Register of Members”. The physical share certificate is then returned to the new owner with a noting on the share certificate with its name.
The shares in public companies are statutorily required to be in dematerialised form. The depository agent records the transfer in its books and issues a ‘benpos’ (beneficial ownership) statement reflecting the name of the transferee. The transfers are completed by an executed ‘depository slip’ deposited by the seller with its depository agent along with details of the demat account of the purchaser, number of shares transferred, etc. There is currently an exemption available for payment of stamp duty on transfer of shares in dematerialised form. However, there is a proposal to do away with this exemption and levy a nominal stamp duty on such transfers.

Additionally, the share purchase / subscription agreement executed by the financial sponsors with the seller / target company is also subject to payment of stamp duty as a separate instrument (in addition to stamp duty on share transfer forms). The quantum of stamp duty on such agreements would depend upon the State in which the same is executed and retained. There is a proposal to have a uniform stamp duty on such agreements across India and also eliminate possibility of multiple stamp duty being imposed on a single transaction where it is implemented by executing multiple different instruments / documents (example, in relation to shares it would be the agreement, share transfer forms, share certificate).

Direct Taxes

Securities transaction tax at the rate of 0.1% of the value, if settled by the actual delivery of shares, is payable in case of share transfers of a listed Company. Capital gains taxes along with applicable surcharges and cess under the (Indian) Income-tax Act, 1961 is payable in case of a share transfer. However, the specific rates and the time of payment/withholding will depend on the jurisdiction and residency of the transferor.

Updated: March 8, 2019