What formalities are required in order to document a transfer of shares, including any local transfer taxes or duties?
Mergers & Acquisitions (3rd edition)
A transfer of shares usually implies the following formalities:
- the entering into a share purchase agreement;
- authorization and approval of the share transfer by the seller and the purchaser;
- registration of the share transfer in the share register.
A share transfer may also imply the issuance of a share certificate in the name of the purchaser.
In principle, a transfer of shares does not give rise to Belgian stamp or registration duties.
Where an acquisition is being effected by way of amalgamation, merger or scheme of arrangement there is no formal instrument to transfer shares. In the context of a merger or amalgamation, the merger or amalgamation is effected by operation of law subject to the terms of a statutory merger agreement upon the submission to the RoC of an application to register the same together with certain supporting documentation.
In the context of a scheme of arrangement, the transfer of shares is effected by the order of the Bermuda courts sanctioning the scheme (or any subsequent order).
Where a company is a private company, an instrument of transfer is required under Bermuda law. However, where a company is a public company listed on an exchange, the bye-laws of the company will typically provide that transfers can be made in accordance with the rules of such exchange. This will usually negate the need for an instrument of transfer and may permit transfers by electronic means.
Provided that the subject of the acquisition is an exempted company, that is to say, not a company subject to local ownership requirements, no transfer taxes or duties should arise on the transfer of shares.
Transfer of shares in a corporation or a simplified stock corporation is undertaken by means of a letter sent by the transferor to the company informing the legal representative of the transfer and requesting the formalization of the transfer or endorsement of the shares of the company to the transferee, registration of the transferee and the transfer in the shareholders registry book and cancellation of the former shares and issuance of new share certificates.
When transferring a share in a limited liability company, two legal transactions must be distinguished – a share purchase agreement (SPA) and a share transfer agreement (STA). Only the STA has to be concluded in the form of a notarial deed and solemnized by the Croatian public notary, whereby the SPA, subject to certain terms and conditions, does not necessarily have to be in the form of a notarial deed. Both agreements may be concluded at one time, in the form of the same notarial deed or may be concluded as two separate legal transactions, in the form of two separate agreements. The notary fees generally depend on the amount of the purchase price.
The company’s articles of association do not need to be changed. Transfer of a share must be entered in the company’s book shares. The management board is obliged to submit to the Commercial court registry an updated list of shareholders evidencing that the change in the shareholders’ structure has occurred. This registration with the Commercial court registry is only declarative inter partes and constitutive towards the third parties. Commercial court fees are typically fixed and need to be paid for each registration or amendment made in the Commercial court registry.
In joint-stock companies, the bidder is obliged to submit to HANFA the following documents, either originals or in form of a notarial deed: (i) legal documents based on which the bidder acquired the target’s shares within 1 year preceding the obligation to publish a bid; (ii) bidder's sworn statement (and/or the sworn statement of the person acting in concert with the bidder) stating that there have not been concluded any other legal documents, except those on the basis of which the target’s shares would be acquired; (iii) depository confirmation of the deposited remuneration for the shares subject of the takeover; (iv) confirmation of the stock exchange or regulated public market about the average price of the shares, (v) agreement concluded with the depository; (vi) previous approval from the Croatian National Bank if the target company is a bank or other financial institution, if its prior approval is required; (vii) acquirer’s excerpt from the court register or other competent register certifying its legal form, registered seat, business address, and authorized representatives, which is not older than 30 days; (viii) a certified translation into the Croatian language is required if the acquirer is a foreign company; (ix) a fair market value report audited by an independent auditor, in cases when the shares have been illiquid during the last three months prior to the offer, i.e. if the shares have been traded for less than 1/3 of a trade day in that respective period; (x) other documents requested by HANFA; and (xi) evidence of the fee paid to HANFA. The share transfer agreement does not have to be concluded in the form of a notarial deed but only the seller’s signature has to be notarized.
If the transaction is one of those that previously requires the authorization of the Superintendency of Control of the Market Power, in accordance with the LORCPM, prior to the closing of the transaction, the authorization procedure must be carried out.
In the case of shares issued by a listed company, the requirements of the stock exchange in which the company is listed should be observed.
In all cases, it is necessary to observe the following:
- The registration of the acquisition must be made in the Shares and Shareholdings Book of the Target company;
- The transfer of ownership of the shares must be notified to the Superintendency of Companies;
- The Ecuadorian Internal Revenue Service must be notified of the new capital structure of the Target company.
If the acquiror is a foreigner, the investment must be registered at the Central Bank of Ecuador, as a direct foreign investment.
The Ecuadorian law establishes the capital gain tax that must be paid by the seller of the shares. This tax has a maximum rate of 10% calculated on the profit made by the seller.
The transfer of shares in limited liability companies needs to be executed in the form of a notarial deed and therefore an Austrian notary public (or a notary public subject to a comparable regime, such as a German notary public) has to be involved. Furthermore, shareholders of limited liability companies are registered with the Austrian commercial register. Changes have to be reported to the competent Commercial Register Court without undue delay, whereby the registration with the commercial register generally is only declarative and thus does not prove ownership. The notary fees typically depend on the purchase price.
The shareholders of joint stock corporations are not registered with the Austrian commercial register, but the owners of registered shares have to be registered with the share register of the company.
For each registration or change made in the commercial register, application fees have to be paid to the Commercial Register Court, whereby such fees typically are fixed at comparably low amounts.
In addition, regarding asset deals, the new owner of real estate has to be registered with the land register, whereby a fee for the land register registration (Eintragungsgebühr) as well as a real estate transfer tax (Grunderwerbsteuer) under the Real Estate Transfer Tax Act have to be paid.
As to share deals regarding a target that owns real estate, the real estate transfer tax (and no fee for the land register registration) has to be paid. However, the tax under the Real Estate Transfer Tax Act is only payable if the purchaser (alone or together with its affiliated companies pursuant to Section 9 of the Austrian Corporate Tax Act or through a fiduciary relationship) acquires more than 95% of the shares in the target company.
For asset deals, in principle value added tax has to be paid. Share deals are exempted from value added tax.
An area that requires specific attention is the Austrian Stamp Duty Tax. The Stamp Duty Act provides that certain contracts as well as contracts which contain certain provisions (e.g., suretyships, pledge agreements, assignment agreements, rental agreements) trigger stamp duty amounting to a percentage of the concrete consideration. Typically, stamp duty tax can become payable based upon the simple fact that a written document is being drawn up in Austria. Though a share purchase agreement itself is not subject to the stamp duty tax, suretyship arrangements whereby one company is obliged to step in and fulfill a liability if for example a subsidiary does not perform can trigger stamp duty.
Regarding public bids, fees to be paid to the Takeover Commission depend on the transaction volume of the takeover.
With regard to the transfer of shares in limited liability companies falling within the scope of the private M&A transactions, the signatures of the contracting parties on the ownership interest purchase agreement shall be notarised. After the completion of acquisition of the ownership interest(s) in the limited liability company, the respective changes have to be recorded into the commercial register without undue delay, e.g. the acquirer of the ownership interest(s) as the (sole) member of the limited liability company (even though the registration of the respective changes with the commercial register is of a declarative nature and does not have any impact on the transfer of the ownership interest(s)).
In case of the transfer of the shares in the joint-stock company, the change of the shareholder(s) of joint-stock companies are not subject to registration obligation with the commercial register (except for the case where the purchaser will become the single shareholder) because the shareholders of the joint stock companies are not recorded there unless otherwise stated in the Business Corporations Act.
There is no transfer tax (stamp duty) for the transfer of shares in Czech companies. Other taxes (e.g. withholding tax, VAT in case of asset deals and other) may apply depending on the structure.
British Virgin Islands
There are no transfer taxes or duties in the BVI, unless the merger relates to a company which holds real estate in the BVI. The merger plan and corporate authorisations will deal with all necessary transfer formalities. The transfer of shares outside of a merger is dealt with by a share transfer form and requires the company’s registered agent to update the register of members following the transfer.
There is no transfer tax or stamp duty in the Cayman Islands in connection with the transfer of shares in a Cayman Islands exempted company (other than those of a company that holds interest in real estate in the Cayman Islands).
In the case of a company, it is typical that the contractual agreement pursuant to which the share transfer is taking place along with an executed share transfer form is produced to the Board of the company which issued the securities. The Board will then approve the transfer and instruct the relevant person to update the register of members of the company (at which time the transferee will become the legal holder of such shares in the company).
In the case of an LLC, it is again typical that the contractual agreement pursuant to which the transfer of LLC interests is taking place is produced to the manager(s)/managing member(s) of the LLC. Any other formalities prescribed in the LLC agreement must be complied with. The manager(s)/managing member(s) will then approve the transfer and instruct the relevant person to update the register of members of the LLC and, as applicable, the schedule to the LLC agreement.
French law does not require a written deed of sale in connection with a transfer of shares: the transfer of ownership of the shares is carried out by an account to account transfer. For evidentiary reasons, however, it is strongly recommended that the transfer be recorded in writing, stating the characteristics of the transaction.
The transferor must then notify the transfer of shares to the company with the deed of sale or by a movement order containing the information the date of the transfer, the account of the transferor to be debited, the number of shares transferred in full and in figures, the nature of the shares transferred, identification of the holder of the transferee's account to be credited or to be created. The company then registers the purchased shares in the buyer's account and updates the transaction log.
Transfers of shares are subject to registration fees: the purchaser must register with the tax authorities any deed drawn up, or a form n°2759 if applicable, within one month of the signature of the deed or the completion of the sale and pays the registration fees on the transfer of the shares. Lastly, the transferor could be subject to taxation (corporate income tax / income tax and social security levy) on any capital gain realized on the sale of its shares.
Listed shares are transferred via the Athens Exchange Depositary. As far as non-listed companies are concerned, Law 4548/2018 brought by a significant change, providing that SAs issue only registered shares. If the titles are electronic and not physical, specific registrations must be made in the electronic register of the company, while contracting parties have no longer the obligation to sign the electronic register. Where the register is not kept electronically, the parties must register the transfer in the shareholders’ ledger and sign it, as otherwise the transfer will only be valid and binding between the parties but not vis a vis the company. Physical registered shares are physically transferred and endorsed in writing at the back of the title; alternatively, they may be destroyed and replaced by new shares bearing the name of the acquirer.
For a private company, in addition to a share transfer agreement between the parties, if the target company is a company that issues share certificates (the Companies Act allows private companies to choose whether they will issue share certificates or not), the seller must deliver the relevant share certificates to the acquirer. Further, regardless of whether or not the target company issues share certificates, the shareholder registry must be updated in order for the acquirer to perfect the share transfer. The Articles of Incorporation of private companies usually contain a provision that requires the approval of the board of directors or the shareholders for a share transfer. In such case, a resolution must be approved at a board of directors’ meeting or shareholders’ meeting, as applicable, and the minutes to record such resolution must be prepared.
For a public company, the transfer of shares of a listed company will become effective when the share transfer is recorded in the account of the acquirer at the relevant account management institutions (typically, the relevant securities companies).
No transfer taxes or duties are imposed on the transfer of shares of public or private companies in Japan.
Other than in the case of a transmission of shares by operation of law, the transfer of shares that are certificated generally requires that an instrument of transfer in writing has been delivered to the target company. The articles of association of the company usually specify additional requirements including delivery of the relevant share certificate (or the giving of an appropriate indemnity for a lost share certificate) and that the instrument of transfer be in a form approved by the directors and executed by the transferor and, where shares are not fully paid, by the transferee.
Uncertificated shares may be traded through CREST pursuant to the Companies (Uncertificated Securities) (Jersey) Order 1999 (as amended).
There are no registration, stamp, documentary or any similar taxes or duties of any kind payable in Jersey in connection with transfers of shares (except in the case of share transfers that confer a right of occupation of dwelling accommodation in Jersey).
Generally, a transfer of shares needs to be approved by the board of directors of the target company. Pursuant to section 87 of the Companies Act 2001, a company shall not enter a transfer of shares in the share register unless a valid instrument of transfer has been delivered to the company in the form required by law. The share transfer form should be executed and filings must be done with the ROC and a copy of same can be sent to the FSC. The register of members should be updated as regards to the transfer and if relevant, the share certificates should be issued.
Stamp duty is applicable where the company whose shares are being transferred owns immovable property in Mauritius.
Under section 83 of the MCL, a transfer of shares in a company is effective upon the company entering it in its register of shareholders. A company is required to enter such transfers in its register of shareholders subject to its constitution and the receipt of a duly stamped and executed instrument of transfer in the prescribed form, together with share certificates evidencing the interests proposed to be transferred and a declaration by the transferor or transferee (or both) regarding whether the proposed transfer would result in the target company changing its classification from a Myanmar company to a foreign company or vice versa.
Under the Myanmar Stamp Act 1899 stamp duty is payable on share transfers in the amount of 0.1 per cent of the value of the transfer price.
Within 21 days of a transfer of shares in a Myanmar-registered company, a notice must be filed with Dica in the prescribed form notifying it of the transfer. Other associated filings with Dica may also be required, for example, for a change in its business name, or directors.
Under the MIL a notice must be filed with MIC for any transfers of shares in, or the business of, a company with an MIC permit or endorsement. As noted in question 1, the prior approval of the MIC will be required for any direct or indirect transfers of shares in a company which has an MIC permit or endorsement (or to transfer the business itself), if it will result in an entity that is not an affiliate of the transferor acquiring majority ownership or control of the shares, or more than 50 per cent of the assets, of the business.
A share sale agreement could in principle be executed without observing any particular form under Norwegian law. A buyer is not liable to pay stamp duty or any type of transfer taxes on the acquisition of shares in a Norwegian target company, neither public (ASA) nor private (AS).
In an AS-company, the LLCA provides that the buyer must notify the target about a share transfer. Unless otherwise provided in the target's articles of association, acquisition of shares is subject to the target company's consent, by resolution of the board of directors. Such decision shall be made as soon as possible after the acquisition is notified to the target and the buyer shall be notified without delay. Consent may only be denied on reasonable grounds and, if not granted, the buyer shall be provided with the reasons for denial and information on any action necessary to remedy the situation. If the buyer is not notified that consent is not given within two months following notification to the target, consent is deemed granted. When notification from target is received and consent from target is granted, the target must register the buyer in the target's shareholder's register without undue delay. The registration of ownership to the shares in the register formally transfer the title to the shares acquired, and legally protects the buyer from any action from the seller's creditors or competing third party buyers.
Transfer of shares in an ASA-company is, as a general rule, neither subject to notification from the buyer nor subject to approval from the target company, however the articles of association of the target company may describe otherwise.
Even though transfer of shares in ASA-companies are generally not subject to approval, the buyer may only exercise its shareholders rights when the transfer is registered in a shareholder register kept with a securities register (required under the PLLCA), or the transfer is notified and verified without being prevented by restrictions such as consent or pre-emption rights. Also, the articles of association of such ASA-companies may provide that the right to attend and vote at the general meeting can only be exercised if the transfer has been entered in the register of shareholders five working days before the meeting. Exercise of dividend rights, other disbursements and the right to participate and subscribe for new shares in capital increases is further always conditioned upon registration in the shareholders register kept with the securities register. The previous owner of the shares is obligated to ensure that the transfer is reported to the securities registry immediately following the share transfer. Note that for ASA-companies, it is assumed that a seller (unless otherwise agreed with the buyer) loses its rights to vote on the general meeting from the date he enters into a binding agreement to sell the shares, and that the buyer cannot exercise this right until he is entered into the register of shareholders.
Transfer of shares is a private transaction; however, for publicly traded companies, the transfer should be registered in the registry of the corresponding settlement institution. In addition to this, the transfer needs to be communicated to the Tax Authority.
Documentation requirements vary depending on the type of merger and acquisition transactions entered into by the contracting parties. In practice, a definitive agreement is executed to document final terms and conditions of the transaction, including the transaction structure, price, and conditions precedent to closing. Once the parties completely comply with the conditions precedent, an implementing deed or document is executed to consummate the transaction.
A share acquisition typically uses a Share Purchase Agreement which is implemented by a Deed of Absolute Sale of Shares of Stock. For an asset acquisition, parties usually sign an Asset Purchase Agreement which is consummated by the execution of a Deed of Absolute Sale or Deed of Assignment.
Mergers and consolidations require a plan of merger or consolidation which shall be approved by the board of directors and stockholders of each of the constituent corporations. After the approval of the plan of merger or consolidation, articles of merger or consolidation shall be executed by each of the constituent corporations and submitted to the SEC for approval. Banks, building and loan associations, trust companies and other financial intermediaries, insurance companies, public utilities, educational institutions, and other corporations governed by special laws must first obtain the favorable endorsement of the appropriate government agency for the said merger or consolidation.
Taxes are generally imposed on the sale or transfer of shares or assets, and the tax rate depends on the type, utilization and other qualities of these shares or assets. A Certificate Authorizing Registration (“CAR") issued by the BIR is required before a Corporate Secretary can register the transfer of shares of stock in the corporate books or before the Registry of Deeds can issue a new title in connection with a transfer of land. Nevertheless, a CAR is not required for the sale or transfer of movable property.
The sale of shares of stock is subject to a capital gains tax. For the sale of assets, the taxes imposed would depend on whether the asset is considered real property and whether such asset is considered an ordinary asset or capital asset.
The sale of real property considered as a capital asset is subject to a capital gains tax. On the other hand, the sale of real and other properties considered as ordinary assets is subject to corporate income tax and value added tax, and other taxes and fees depending on the type of assets sold.
Mergers and consolidations are generally structured as tax-free transactions pursuant to the Philippine Tax Code. Nonetheless, a ruling from the BIR needs to be obtained in order to implement the tax-free transfer of shares.
Isle of Man
Subject to any restrictions contained within a company’s constitutional documents, shares in 1931 Act and 2006 Act companies are transferable by a written instrument of transfer. There is no stamp duty on shares payable in the Isle of Man.
The transfer of quotas in sociedades por quotas need to be documented in writing and the prior consent to the transfer from the company is required, unless (i) the transferee is another shareholder or a related person or (ii) the by-laws provide otherwise. The transfer of quotas is subject to registration with the Commercial Registry Office. No transfer tax is due, but property transfer tax may be levied in certain cases.
The transfer of shares in sociedades anónimas is not legally subject to any limitations, but it is possible for the by-laws of companies that do not have their shares listed in a regulated market to impose certain restrictions.
The transfer formalities depend on how the shares are represented: titles or in book-entry form.
If the shares are represented by titles, the transferor shall make and sign a transfer statement in the title and notify the target to update its internal share registrar.
If the shares are in book-entry form, the transfer shall be registered in the individual registration account of the transferee. These accounts may be held with a financial intermediary integrated in a central securities depository, a single financial intermediary, or the issuer or a financial intermediary representing the issuer.
No transfer tax is due, but the transfer of shares has to be notified to the Portuguese tax authorities within 30 days from exchange.
In case of private companies, the main documents that need to be prepared in order to document a share transfer are: the sale-purchase agreement, the shareholders register, corporate approvals and registration forms with the Commercial Registry Office (in case of limited liability companies).
In the case of listed companies, the parties must complete the stock market-specific formalities for share transfers.
Under Russian law, formalities associated with registration of transfer of title would differ depending on the legal organisational form of a target company.
The right to register transfer of title to shares in joint-stock companies is vested with professional independent registrars or, as the case may be, depositaries (nominal holders).
Although overall approach to registration may slightly vary from one registrar/depositary to another, the general rule is that in order to register transfer of shares, the buyer shall provide to the registrar/ depositary a set of required documents, which usually include the seller’s transfer instruction as well as a set of documents with respect to the buyer required to open the relevant personal account with the registrar / depositary (usually includes the new shareholder’s questionnaire, charter, resolution on establishment, etc.).
With regard to limited liability companies, transfer of participation interests requires mandatory certification by a notary public of the relevant participatory interest sale and purchase agreement. Once notarial certification is in place, the relevant title change is to be entered into the Unified State Register of Legal Entities. In order to effect such entry, an application drafted pursuant to an approved form is submitted within 2 (two) business days of certification of the agreement to the registration authorities, which then have 5 (five) business days to register the transfer of title to participatory interest.
In order to effect transfer of ownership of certificated securities, the original share certificate(s) together with a signed share transfer form will be delivered to the company. In relation to uncertificated securities, transfer of ownership is effected by a participant or the central securities depository debiting the account in the uncertificated securities register from which the transfer is effected and crediting the securities account to which the transfer is effected, on receipt of an instruction to do so. In both cases, the transfer and details thereof must be entered in the company’s securities register.
The transfer of beneficial ownership in securities is subject to securities transfer tax at a rate of 0,25% on the total amount of the transfer, or in certain circumstances the market value of the consideration for the transfer of the securities.
A share transfer is normally carried out through a share sale and purchase agreement (long form or short form). The recording of the new owner in the target company’s share register and the physical transfer of the original share certificates (if such have been issued) to the purchaser are legal requirements for third party protection for a share transfer (and to ensure that the buyer gets to enjoy the rights as shareholder). There is no external registration process (notary public or similar for the transfer of shares or assets (other than real estate)) and there is no transfer tax levied on share transfers.
The transfer of shares in a private company requires a share purchase agreement and the delivery of the (endorsed) share certificates or, if no certificates have been issued, a written assignment declaration. If the shares are subject to transfer restrictions, transfer of legal title requires the prior approval by the board of directors. Shares in listed companies are typically in book-entry form; their transfer is executed electronically through the banking system.
Federal stamp tax is payable in connection with a transfer of Swiss shares if a securities dealer (as defined in the Federal Stamp Duty Act) is involved, either as a party or as an intermediary. Certain types of transactions or parties are exempt. Securities dealers under the Federal Stamp Duty Act include banks, dealers in securities and, among others, Swiss companies holding securities with a tax book value of more than CHF 10 million. A public tender offer regularly triggers stamp tax as it involves a bank for the settlement of the offer. The duty is typically paid by the bidder.
A share transfer instrument is required to be entered into between the transferor and the transferee and witnessed by at least one witness.
The share transfer instrument is subject to stamp duty calculated at the rate of 0.1% of the greater of the sale price of, or the amount paid up on, the shares, if it is executed in Thailand or executed overseas and subsequently brought into Thailand.
Unless agreed otherwise by the parties, the stamp duty is payable by the seller of the shares.
Publicly Listed Company
There is currently no stamp duty payable in the case of a transfer of listed shares.
Formalities for transferring the shares of an onshore company includes signing a share transfer form in a format prescribed by the Notary Public. Subsequently the company will be required to amend the commercial or trade licence to show the new shareholders.
In the UAE, the government issued Federal Decree-Law concerning Value Added Tax (8/2017), which introduced VAT with effect from 1 January 2018 at a rate of 5%. Businesses with turnover in excess of Dh375,000 (approximately $100,000) are required to register.
A transfer fee of 0.5% of transfer value capped at Dh15,000 (approximately $4,000) is payable to the notary on the transfer of shares in UAE companies. A transfer fee of between 1% to 4%, depending on the emirate and the nature of the interest being transferred, is generally levied on the transfer of real estate in the United Arab Emirates.
Generally, share transfers are effected pursuant to a share purchase agreement between the parties, unless the shares have been purchased through the open market on a stock exchange. An instrument of transfer of securities held in physical form is required to be in Form No.SH.4 and every instrument of transfer is to be delivered to the company within sixty days from the date of its execution. This is in addition to any formalities that may be prescribed under the Articles of Association of the company. Each transfer of shares is then approved by the board of the company, and thereafter recorded in the register of members of the company.
Stamp duty payable on shares held in physical form is 0.25% of the consideration for the transfer of shares.
22.1 In the case of any target LLC, ownership of contributed charter capital is in all cases registered on the face of either or both of an Investment Registration Certificate (in the case of many foreign-invested LLCs) and/or an Enterprise Registration Certificate (in the case of all LLCs) – each of which is a certificate issued by the relevantly-empowered State licensing authority (noting that such certificates cannot necessarily be relied upon as providing conclusive evidence that the charter capital registered therein has in fact been duly and properly paid in). Therefore, in order for any ownership of any contributed charter capital of any LLC1 to be transferred, it is invariably necessary to procure amendments to the applicable IRC and/or ERC, in order to register such transfer and the particulars of the transferee.
22.2 In the case of any target LLC, any transfer of any contributed charter capital will require the following documentation, in addition to the necessary amendments to the applicable IRC and/or ERC:
(i) a charter capital transfer agreement;
(ii) amendments to the internal Register of Members maintained by the LLC; and
(iii) the cancellation of the Certificate of Charter Capital Contribution held by the transferor and the issuance of a new Certificate of Charter Capital Contribution in favour of the transferee.
22.3 In addition, in order for any transfer of contributed charter capital in any LLC to be completed, “tax clearances” must be obtained from the local tax authorities, following the payment of “capital transfer tax” (where applicable). In relation to target companies being LLCs, capital transfer tax is payable by all vendors (whether foreign or domestic, organisations or individuals) who realise any capital gain on the transfer, at the rate of 20% of the capital gain realised by the vendor on the transfer.
22.4 In the case of any target JSC being a private company, in order for any transfer of shares in that JSC to be documented and completed, in all cases the following documentation is required:
(i) a share transfer agreement;
(ii) the updating of the internal Register of Shareholders of the JSC, to reflect the transfer and the particulars of the transferee;
(iii) the cancellation of the Share Certificate held by the transferor and the issuance of a new Share Certificate to the transferee.
22.5 In the case of any target JSC being a private company, tax clearances must also be obtained, following the payment by the vendor of capital transfer tax (being assessed in all cases at 20% of the capital gain realised by the vendor on the transfer).
22.6 Where any transfer of shares in any private JSC gives rise to any change in the shareholdings of the founding shareholders of the JSC or any change in the foreign shareholdings in the JSC, such changes must be reported to the relevant local corporate licensing authority as a post-completion matter.
22.7 Where the purchaser of any shares in any private JSC is a foreign investor, in most cases it will be necessary for that foreign investor and the target company to apply for and obtain from the local corporate licensing authority an “acquisition approval”, as a condition precedent to completion.
22.8 In the case of any target JSC being a public and listed company:
(i) where shares are purchased by way of normal On-Market Transactions, no documentation is required;
(ii) where shares are purchased by way of Direct Agreement Transactions, a share sale and purchase agreement is required;
(iii) the transaction is implemented by the parties’ respective Vietnam securities brokers, via the compulsory electronic share registry and clearance systems maintained by the VSD and Custodian Banks being members of the VSD; and
(iv) the results of the transfer and the registration of the transferee’s ownership of the shares are recorded in the electronic share registry system maintained by the VSD.
22.9 In the case of any target JSC being an unlisted public company, the procedural and documentation requirements are broadly similar to those applicable in relation to listed companies, except that the transfer process is administered via the UPCOM (with the parties’ respective securities brokers, the VSD, and the Custodian Banks still playing a crucial and compulsory roles, in a manner being broadly similar to that applicable in the context of listed companies).
22.10 In the case of any target JSC being a public company (whether listed or unlisted), full completion of the transfer of shares cannot occur until such time as capital transfer tax has been paid by the vendor, assessed in all cases at the rate of 0.1% of the transfer consideration (with the realisation or otherwise of any capital gains being irrelevant). In practice, it is the responsibility of the vendor’s securities broker to deduct and remit such capital transfer tax to the State, before remitting the balance of the sale proceeds to the vendor.
22.11 In relation to any M&A transaction in Vietnam where the vendor and/or the purchaser is a foreign investor, Vietnam foreign exchange control laws must be considered, and it will in all cases be compulsory for purchase prices to be routed through certain special types of statutory bank accounts held by the vendor, the purchaser, and/or the target company with appropriately licensed banks in Vietnam.
22.12 There are many variables and permutations which apply in connection with M&A transactions in Vietnam. The procedural and documentation requirements of any two or more M&A transactions in Vietnam are rarely identical. From a procedure and documentation perspective, each and every proposed M&A transaction in Vietnam must be considered and analysed carefully on its own individual and unique merits.
The majority of shares in U.S. public companies are held in book-entry form by the Depository Trust Company, commonly referred to as DTC. Where this is the case, transfers are undertaken by banks, brokerages and other financial institutions and typically do not result in any change to record ownership. Where shares are held in registered form, a transfer agent typically completes transfers of shares for the issuing company. The specific requirements of each transfer agent may differ slightly, but in general shareholders must provide a stock power, provide evidence of legal capacity to sign the stock power and send any physical share certificate representing the shares to be transferred to the transfer agent. Once it receives all the necessary documentation, the transfer agent will transfer ownership on the company’s share register and, if the new holder wishes to hold its share in certificated form, issue a new certificate.
The federal government does not impose transfer taxes on the transfer of shares, but the laws of some states do impose such transfer taxes.
In a private M&A transaction, the parties will register the shareholder change as well other corporate changes of the target company (e.g., the change of the legal representative and directors) wish the applicable local branches of the SAMR and the tax authority. If a foreign investor is involved, typically a filing with the local MOFCOM is required as well. If any seller is an individual, the acquiror will be required to withhold and pay to the local tax authority Individual Income Tax levied on the capital gain of such transfer on behalf of the individual seller. The parties will also required to pay a stamp duty.
In a public M&A transaction, the parties should register the transfer of shares of the target company at the applicable branch of the China Securities Depository and Clearing Corporation Limited (CSDC).
Transfer of listed shares is evidenced by a statement of account issued by MCDR and reflecting credit of the acquired shares in the buyer’s account. Transfer of unlisted shares is effected through the EGX and evidenced by an EGX transfer of title certificate and a statement of account issued by MCDR, if the company is registered with MCDR.
As for the transfer of quotas of limited liability companies, such transfer is evidenced by registering such transfer in the Quotas Ledger of the company.
Capital gains realized from the sale of unlisted Egyptian shares and quotas of limited liability companies by both resident and non-resident shareholders are subject to capital gains tax at the standard corporate tax rate of 22.5%.
According to article 56 bis of the Income Tax Law No.91/2005, capital gains realized from the sale of listed Egyptian shares are subject to 10% withholding tax. The application of this article had been suspended for two years as of May 17, 2015. Such suspension was further extended for a period of three additional years, ending on May 16, 2020. Accordingly, no capital gains tax are currently collected with respect to sale of shares of companies listed on the EGX.
Further, recently the transfer of listed and unlisted shares have become subject to stamp duty taxes. Article 83 bis was added to the Stamp Tax Law No. 111 of 1980, and provides that a proportional stamp duty shall be imposed on the purchase or sale of all securities whether such securities are Egyptian or foreign securities, listed or not listed, without deducting any costs as follows:
- 1.25 per thousand to be borne by the seller and 1.25 per thousand to be borne by the buyer, as of the date of coming into force of this law until 31 May 2018.
- 1.50 per thousand to be borne by seller and 1.50 per thousand to be borne by the buyer, as of 1 June 2018 until 31 May 2019.
- 1.75 per thousand to be borne by the seller and 1.75 per thousand to be borne by the buyer, as of 1 June 2019.
Article 83 bis (1) states that acquisitions and exits concluded in one transaction are subject to the tax set out in article 83 bis at the rate of 3 per thousand without deducting any costs in the two following cases:
- If the transaction is concluded on 33% or more of the shares or voting rights of a resident company; whether in terms of the number of shares or their value.
- If the transaction is concluded on 33% or more of the assets or liabilities of a resident company by another resident company in return for shares in the purchasing company.
In both cases, the seller bears the tax at 3 per thousand and the purchaser bears the tax at 3 per thousand.
In order to register the transfer of shares in a Guernsey company there are two basic requirements. These are the execution of a transfer instrument and the updating of the company’s Register of Members. If shares are held in certificated form, an instrument of transfer compliant with the requirements of the company’s articles of incorporation will need to be completed, signed and delivered to the company secretary. If the shares are held in uncertificated form and are traded on a computerised settlement system, for example on CREST, a transfer of shares will need to be carried out in accordance with the relevant CREST rules and the Uncertificated Securities (Guernsey) Regulations, 2009.
Once the instrument of transfer has been delivered to the board they may either direct that the Register of Members be amended or, on rare occasions and unless prohibited by the articles of incorporation, refuse to register the transfer. The new shareholder will only be recognised as the owner of the shares and adopt the rights and liabilities of those shares once entered into the Register of Members.
With the exception of when the target company owns real property, no stamp duty, registration tax or similar documentary tax or charge is currently payable in Guernsey for the sale of shares in a Guernsey company. Consideration should be given to whether such fees and taxes or their equivalents may be payable in other jurisdictions if the transaction documents are being executed outside of Guernsey.
An instrument of transfer would normally be required for a transfer of shares of an Offshore Entity. Hong Kong stamp duty may be applicable in relation to the transfer of shares registered on a Hong Kong branch share register of an Offshore Listing Vehicle.
In a private M&A deal, the parties will enter into a sale and purchase agreement while in public M&A transactions the offer document and form of acceptance or the scheme of arrangement will be used. In both instances, transfers of title to shares in a company incorporated in England and Wales must be made using a stock transfer form unless the shares in question are held in uncertificated form through the electronic CREST system.
The stock transfer form used is usually the form prescribed by the Stock Transfer Act 1963 but a company's articles may permit the directors to approve any form of transfer. Where a transfer is effected through the electronic CREST system, this is achieved through a transfer instruction being submitted through the electronic CREST system.
A stock transfer form will need to be stamped by, and stamp duty paid to, HMRC before the transfer of shares can be registered in the books of the target company. Due to the requirement to submit stock transfer forms to HMRC for stamping, there will typically be a time gap between completion of the transaction and the date on which the buyer is registered as the legal owner of the shares acquired. Stamp duty applies on the transfer of certificated shares unless the consideration for the transfer is £1,000 or less, or another exemption applies (for example, companies whose shares are listed on a recognised growth market like AIM). Stamp duty is currently payable at the rate 0.5% of the consideration paid for the shares, rounded up to the nearest multiple of £5 and must be paid within 30 days of the stock transfer form being signed and dated.
Section 73 of the Companies Law contains the only restriction governing the transfer of shares in a Cyprus company and provides that, irrespective of what is contained in the company’s articles of association, the company may not proceed to register a transfer of shares unless a properly executed instrument of transfer is delivered to the company.
In general, however, the following formalities are required in order to document a transfer of shares in Cyprus:-
i. Sale and purchase agreement in relation to the shares being acquired;
ii. An instrument of transfer properly executed and delivered to the company;
iii. A resolution of the board of directors of the company approving the transfer of shares;
iv. Cancelation of the expired and issuance of new share certificates;
v. Amendments in the register of members of the company; and
vi. Filling all the relevant application forms with the Registrar of Companies and Official Receiver in Cyprus.
Nominal local fees would be applicable for the registration of the transfer of shares with the ROC as well as stamp duty considerations which should be taken into consideration.
The formalities prescribed by the relevant laws, most importantly the Civil Code, the Company Procedure Act as well as the Capital Market Act depend on the corporate form of the target company. Different formalities apply in case of limited liability companies (Kft.), private companies limited by shares (Zrt.) and public companies limited by shares (Nyrt.).
Quota of a limited liability company. The ownership stake held by a shareholder in a limited liability company (Kft.) is called a “quota”. Most commonly, shareholders have one single quota in a Kft. (proportionate to the rights it embodies), but if the shareholders so agree in the articles of association, a shareholder may hold more than one quota. In order to validly transfer a quota, the parties shall conclude a written quota transfer agreement. In order for the transfer to become effective vis-á-vis the company, the acquirer of the quota shall notify the company on the acquisition and enclose the quota transfer agreement to the notification. Once the managing director of the target company has received the acquirer’s notification, he or she shall register the acquirer in the company’s members’ list. The acquirer as the new owner of the quota shall be subsequently registered in the company register kept by the court of registration.
The transfer of a quota may be subject to restrictions. Compliance with these restrictions and proper documentation thereof may be a precondition to the transfer being registered. Restrictions may include the following
(i) If the quota is sold to a third party acquirer (who is not a shareholder of the company yet), the other shareholders, then the company, and finally another third party designated by the company have a pre-emption right regarding the respective quota. Hence, in order to register the acquirer as the new owner of the quota, a waiver or non-exercise of such pre-emption rights must be documented;
(ii) If the shareholders so agree in the company’s articles of association, the quota can be transferred to a third person only with the consent of the company (such consent to be granted by the supreme body of the company);
(iii) If a quota is to be divided and transferred to two or more separate acquirers, or if only a part of the quota is transferred and the other part is kept by the original shareholder, the quota must be divided. Such division must be approved by the supreme body of the company, and shall be documented to register the transfer.
Shares of companies limited by shares. Both printed and dematerialized shares are validly transferred if a valid legal title underlies the transfer, such as sale and purchase, donation, swap, contribution to another company’s registered capital, etc. Printed shares in a private company limited by shares (Zrt.) can be transferred by handing over the printed shares to the acquirer and simultaneously ensuring via a written endorsement that the acquirer’s name be indicated on the share as its owner. For the acquirer to become the owner of the share, its name must be indicated as the owner of the share at the end of a successive chain of previous owners (endorsements). Dematerialized shares in private or public companies limited by shares can be transferred via transferring and crediting the respective shares to the acquirer’s security account.
Importantly, if the formalities duly certify that a given person has become the owner of the respective share, the defect or absence of a valid title underlying the transfer will not have effect vis-á-vis third persons acting in good faith, i.e. the owner certified by the formalities shall be deemed as the owner of the share. In order to be able to be able to exercise its shareholder’s rights vis-á-vis the company, the transfer shall be reported to the company and be registered in the book of shares by the company’s management.
In addition to the above, new shareholders holding more than 50 % of the votes in the target company shall be registered in the company register.
Public companies limited by shares. If a public company limited by shares is acquired by way of a public takeover bid, additional documentation requirements apply as set out in point 21 above.
The payment of transfer taxes or duties is not a requirement for the effective transfer of shares, or for the documentation thereof.
There are no taxes and duties on a share transfer. If the transfer is of shares of a listed company, the same must be registered on the exchange and the company’s own register. If a company is not listed then the transfer must be approved by or notified to, as applicable, the Ministry of Finance, Ministry of Commerce and Industry, Department of Labour and a transfer document needs to be authenticated at the Ministry of Justice.
Under the QFMA Mergers & Acquisitions Rules, following the merger a certificate has to be given to the acquirer proving that the assets owed to him have been transferred.
Further, under Article 174 of the QCB a merged financial institution is exempted from all the fees of registration, documentation and notarisation with the various competent authorities.
In case of a private limited company the share purchase agreement must be concluded in the form of a notarial deed. The buyer acquires the business share after conclusion of the share purchase agreement. The transfer of a business share is formally finalized with the entry of the buyer as the holder of the business share in the court register as the entry into the register is constitutive in effect.
In case of a public limited company the acquisition of shares is formally finalized by the transfer of shares in the central registry of securities that is managed by the Central Securities Clearing Corporation (CDD).
Sellers of shares who are tax residents and also who are tax non-residents of Slovenia are liable to pay personal income tax on any profits made from the sale of shares in companies set up in accordance with the regulations of Slovenia. Legal entities pay tax in accordance with corporate income tax regulation. No local duties are applicable for a transfer of shares.