Is Bank Account Mandatory to Show Transfer Amount. In a company, share transfer means shifting ownership of shares from one person to another. This process ensures that shares are properly transferred and that the consideration amount — the price paid for those shares — is clearly recorded.
Many business owners ask, “Is it mandatory to show the share transfer consideration amount through a bank account?”
Let’s understand what the law says and why using a bank account is the safest and most transparent option.
💼 What Is Share Transfer Consideration?
The share transfer consideration is the amount the buyer (transferee) pays to the seller (transferor) for acquiring the shares.
This payment represents the real value of the transaction and must be genuine and verifiable.
Generally, companies handle this payment through:
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💸 Bank transfer (NEFT, RTGS, or IMPS)
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💰 Cheque or demand draft
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🧾 Adjustments against existing dues, if properly documented
Using a bank transaction offers more credibility and transparency than other methods.
🏦 Why Should Payment Be Made Through a Bank Account?
Although the Companies Act, 2013 does not explicitly force companies to use a bank account, it strongly encourages it for compliance and clarity. Here’s why 👇
✅ 1. Builds Transparency and Trust
When payment happens through a bank, both parties create a clear money trail. This transparency prevents future disputes and ensures that both the transferor and transferee have proper records.
✅ 2. Simplifies Audit and ROC Verification
Auditors and ROC officers often ask for payment proofs during inspections. A bank transaction record acts as undeniable evidence of payment, making the compliance process smoother.
✅ 3. Prevents Unaccounted Cash Transactions
Recording payments through banks ensures adherence to the Prevention of Money Laundering Act (PMLA). It also keeps your company safe from allegations of unaccounted or cash-based dealings.
✅ 4. Helps in Income Tax Filings
Bank transactions leave an official trail, which helps both parties show the share transfer amount in their Income Tax returns without confusion or risk of penalty.
⚖️ Can Share Transfer Happen Without a Bank Account?
Technically, yes — the Companies Act does not prohibit payment through other means.
However, such transactions must include proper supporting documents, such as:
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A declaration of consideration payment,
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A receipt or acknowledgment from the transferor, and
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A board resolution approving the mode of payment.
Even though these documents validate the transaction, cash or non-bank payments are not recommended. They may attract scrutiny from auditors or tax officers.
📊 Best Practices for a Smooth Share Transfer
Follow these practical steps to ensure that every share transfer remains legally strong and transparent:
| Step | Action | Purpose |
|---|---|---|
| 1️⃣ | Pay through bank transfer or cheque | Ensures financial clarity |
| 2️⃣ | Keep both parties’ bank statements | Serves as legal proof |
| 3️⃣ | Mention transaction details in Form SH-4 | Maintains consistency |
| 4️⃣ | Obtain board approval | Confirms internal compliance |
| 5️⃣ | File necessary forms with ROC | Completes statutory process |
By following these steps, your company can avoid compliance issues and maintain trust among shareholders.
✅ Conclusion
While the Companies Act, 2013 doesn’t make it legally mandatory to show share transfer consideration through a bank account, using one is the best practice.
A bank transaction ensures authenticity, makes audits easier, and reduces legal risks. Therefore, every company should record its share transfer consideration using bank-based payment methods for full transparency and compliance.