Private Companies & Share Transfers: What You Need to Know

These entities are privately held, meaning their shares are not traded on public stock exchanges. Ownership is divided among shareholders, and liability is limited to the unpaid value of their shares. This structure offers flexibility, privacy, and control, making it ideal for small businesses, family enterprises, and startups.

One of the key features of private companies is the ability to transfer ownership through share transfers. While this process is more controlled than in public companies, it remains a vital mechanism for managing ownership, raising capital, and executing strategic changes.

Understanding Share Transfers in Private Companies

A share transfer is the formal process of changing ownership of shares from one party (the transferor) to another (the transferee). In private companies, this process is governed by the Companies Act, the company’s Articles of Association, and any applicable shareholder agreements. There are various reasons why a share transfer may occur within a company:

1. Raising Capital:
2. Ownership Changes:
3. Strategic Partnerships:
4. Succession Planning:
5. Employee Stock Ownership Plans
6. Mergers and Acquisitions

 

Overall, share transfers in private companies are a versatile tool for achieving various strategic, financial, and operational objectives.

Procedure and key considerations

The procedure for a share transfer typically involves several steps, ensuring that the transfer is legally compliant and properly recorded.

The board reviews the transfer to ensure it complies with the Companies Act, the company’s articles of association and shareholders’ agreements if any. Once all the relevant information is compiled and documents prepared, the transfer is submitted to the Zambia Revenue Authority for the assessment of Property Transfer Tax (PTT), currently at 8% of the realized value of the shares. The value of the shares liable to PTT is the open market value or nominal value whichever is higher. Once the assessment is approved and paid for, the company proceeds to update the records at the Companies Registry, issue new share certificates and notify other relevant authorities. 

Record Keeping:

All documents related to the transfer (such as the share transfer form, board resolutions, and new share certificates) must be properly filed and retained for future reference. This procedure ensures that the share transfer is legally binding, properly documented, and accurately reflected in the company’s and official public records.

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