The company's shareholding decides the ownership of an
individual in the businesses that have private limited company registration. The
private limited company interest could be sold to attract new investors or pass control of the company. In this article, we look at how shares of a
private limited company can be transferred.
Share Transfer Limitations in AOA: A private limited company,
like a Partnership company, is known to be a “closed organization” of
shareholders. Therefore, the Articles of Association (AOA) may limit the
transfer of shares to a Private Limited Company. The Articles of Association of
the Company must also be checked before the action transfer process starts.
The shareholders’ right to move shares is
typically limited in two forms:
Pre-emption rights: When a shareholder wishes to sell any or all of his
securities, the securities must first be sold to the individual registered
private limited partnership members at a price agreed by the
directors or the partnership auditor. The share value can be determined
based on the formula/method stated in the Articles of Association. In the
absence of any current shareholder, the company’s shares can be openly
transferred to an outside group.
Directors’ powers to deny: the Manager may have the authority to deny, under
some conditions, the registration of the transfer of securities provided
for in the Articles of Association.
Only the restrictions found in the Articles
are legally binding. Any private arrangement between the shareholders is not
binding on the company or shareholders. Therefore, only the Articles of Association can limit the
transfer of shares. The right to transfer shares in a private limited company
cannot be a full restriction on or prohibition of the transferability of
shares.
Share Transfer Procedure Initiation
Private limited partnership ownership
allocation process
The following steps must be followed to
initiate the share transfer procedure:
Step 1: AOA revision: the Private Limited Company’s
articles of association must be checked and limitations discussed.
Step 2: The shareholder will give the Company’s
Manager a written notice of intent to move the company’s share.
Step 3: determine the price according to the Articles
of Association, where its shares would be sold first to its current
shareholders. (This price is usually decided by the Company Directors or the
Company Auditor.)
Step 4: The company will then inform the other
shareholders of the share availability and the final date of purchase of the
stock.
How to Transfer Shares of a Private
Limited Company
The following steps must be taken to carry out the share
transfer:
Step
1: Get the share transfer deed as required.
Step
2: execute the transfer of shares duly signed by the Transferor and
Transferee.
Step
3: Stamp the share transfer deed in compliance with the Indian
Stamp Act and the State Stamp Duty Notice.
Step
4: Have a witness register with their signature, name, and
address of the transfer deed.
Step
5: Attach the transfer document to the share certificate or
allocation letter and send it to the company.
Step
6: the company shall process the paperwork, and the transferor
shall grant, if accepted, a new share certificate.
Created & Posted by (Ramesh Kumar Gupta)
Senior Accounts Manager at TAXAJ
TAXAJ is a consortium of CA, CS, Advocates & Professionals from specific fields to provide you with a One-Stop Solution for all your Business, Financial, Taxation & Legal Matters under One Roof. Some of them are: Launch Your Start-Up Company/Business, Trademark & Brand Registration, Digital Marketing, E-Stamp Paper Online, Closure of Business, Legal Services, Payroll Services, etc. For any further queries related to this or anything else, visit TAXAJ
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