Private trading of shares

Hi All,

If I wanted to purchase some shares from a friend, presumably we are free to negotiate a price as we see fit. After we have done this, as I understand it, two things need to be done:

  1. Transfer ownership of the shares.
  2. Pay the stamp duty (0.5%)

Is this all that needs to be done? Is the form used for transfers generic (i.e. pick it up from the post office), or is it specific to the company issuing the shares?

I assume the stamp duty form is generic. Is the stamp duty due on the "market" price of the shares, or the real amount that I paid for them?

Thanks,

Art

Reply to
Art
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I've done this a number of times. A fair price is probably to take the mid-market price shown in the FT. Watch out for ex-dividend dates, make sure you know who any dividend belongs to. The sale is a chargeable event for CGT, but the IR should be happy with a price close to the market price. It's probably worth you both putting it in writing in case of any future query.

It's a standard format although different registrars may have slightly different versions. Look on the registrar's web site, they generally have them downloadable as PDF files. You also need a form from the stamp office, which may also be on the web or you can get them to send you one. You fill in both forms and send them to the stamp office with a cheque, they stamp the transfer and you then send it to the registrar (with the certificates of course).

Incidentally, registrars seem to be very picky about getting exactly the right spelling for things like names and addresses, make sure you get everything the way it is on e.g. a dividend slip (including any mistakes!).

It's on the amount you pay - note that it's 0.5% rounded up to the next £5, which may affect what you want to pay! I think you can still claim exemption if it's a gift, but it's probably not a good idea to do that if it's really a sale.

Reply to
Stephen Burke

The main issue we have is that the shares we are thinking about trading are very illiquid (they're listed on OFEX) and there haven't been any trades for several months. So determining a fair price becomes a bit trickier (I think). Also presumably as soon as we trade the shares, the exchange will be aware of this and will change the price to match the price of our trade? Or is the price entirely down to the market-makers and not the exchange? At the moment the market makers will only carry out trades on a matched basis.

[snip helpful info on forms]

Thanks,

Art

Reply to
Art

If you want to stay friends with whoever you're trading with, make sure you are both aware of all relevant information about the company and that you are both happy with the deal. There is no real answer to what constitutes a fair price in that situation, you can use the last traded price as a guide but things will no doubt have changed, and it may also depend on your motives for buying or selling, e.g. a forced seller can normally expect a worse price. You could agree to make an adjustment when the next real trade happens (or just wait until then).

I doubt that your trade will change anything, unless it's a significant fraction of all the shares in issue. The price is set by the supply and demand balance (such as exists) and that isn't affected by your trade.

Reply to
Stephen Burke

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