This is with regards a Private Limited Company having 4 Directors each having 20-25% of the Shares. One of the Founder Director, Mr.X who is holding 25% of the Shares wants to transfer 50% of his Shares to his Son-In-Law Mr.Y and desires to bring him in as a New Director to the Company.
A board resolution, to allow Mr.X to transfer his Shares and for appointing Mr.Y as a new Permanent Director to the Company was passed. Later, the CA to the company conveyed that -
1. New Entrant has to first put an application to the Company for purchase of a nominal number of Shares (any number).
2. The Company than has to pass a Board resolution where in the new entrant shall be assigned the status of a "Permanent Director". The new Director than will have to apply for DIN.
3. The New Director than shall have to buy atleast 500 Shares within 3 months of becoming a director, The transferer (Mr. X) than can transfer his Shares to the transferee (Mr. Y)
4. The details of the newly appointed Director than shall be filed to ROC online.
My query - Is this process correct for appoinment of a New Director who does not hold any Share to a Private Company?
Thanks in Advance to all experts for their opinion.
19 February 2012
First u can transfer shares by following given procedures- SHARES TRANSFER IN A PRIVATE COMPANY Restriction in Private company on the right to transfer its shares [Section 3(1)(iii)] Section 3(1)(iii)(a) of the Companies Act, 1956 provides that the Articles of a private company shall restrict the right to transfer the company's shares. Normally 100% shareholding of a private company may be owned by a family or other private group. Cases where Restriction on transfer not applicable Restriction upon transfer of shares in private company not applicable in the following cases:— (i) on the right of a member to transfer his/her shares to his/her representative(s). (ii) in the event of death of a shareholder, legal representatives may require the registration of share in his/her name. Procedure for transfer of shares of private company Transfer of shares in a private company is governed by AOA. Some steps followed by a private company to give effect to the transfer of shares are as follows:— (i) Transferor should give a notice in writing to the company for his intention to transfer his share. (ii) The company in turn notify to other members as regards the availability of shares and the price at which such share would be available to them along with the time limit within which they should communicate their option to purchase shares on transfer. (iii) Such price is generally determined by the directors or the auditors of the company. If none of the members comes forward to purchase shares then the shares can be transferred to an outsider and the company will have no option, other than to accept the transfer. then appoint him following given procedures.. Directors of private limited company can be appointed by Board of Directors of Company. No approval of shareholders is required. The Company has to file e form 32 with the ROC witihin a period of 30 days from the date of appointment.
Point 1. Yes. Where a some person Desires to be a share holder of company, he will have to make application under prescribed form i.e. Share Transfer Form available. on an application company conducts the Board Meeting and then passes resolutions to transfer shares and make necessary entries in the register of members
Point 2: In a Board Meeting company always appoint Additional Director not permanent Director. Such appointed additional Director is then confirmed in Annual General Meeting. And for DIN, he will have to apply before becoming Director. He must possess DIN on the date of appointment.
Point 3. Section 270 which is applicabl only on Public Ltd company (if authorised by AOA). Not on Pvt Ltd. so not necessarily required to take qualification Shares.
Point 4. Yes, details of newely appointed Director shall be filed in form 32 with ROC.
If one of shareholder wanting to transfer 50% shares to his in-laws, then firstly the shareholder apply to the company for splitting share certificate in to two share certificates, after splitting, you enter in share transfer deed for the 50% shares transfer to in-laws and file the same with share certificate to company for registering the transfer.
21 February 2012
Thanks all for the valued opinions.
Few more queries on this topic -
1. Which Share Transfer Form is applicable in this case and where it shall be available, the Company in question is an Unlisted Private Limited Company and is doing a Share Transfer of one of its Director for the first time.
2. Where can i get a format of the Share Transfer Deed? will the same be on a Non Judicial Stamp Paper, if so on what value.
3. On signing of the Share Transfer Deed, How will the Stamp Duty be paid and by whom (Transferor or Transferee), for the change of Shares into Transferees name?
4. In the final steps - Does registering of Shares means filing of the e-Form 32.
Thank you so much for sharing your valuable knowledge on this topic.
But, one has to purchase this 7B form from NSE's Office? What is 'Duly Stamped'?
Probably a completed sample Share Transfer Deed would have given me the complete insight on this, ofcourse if anyone can share the same - My mail id is arkaraj.mukherjee@gmail.com.
Generally a share transfer deed (Form 7B) is an instrument for transfer of shares which will be available with near about stock exchange with the seal of name of present ROC of the concern State.
After executing and filling this instrument submitted with share certificate to company for registering the transfer.
23 February 2012
A friend of mine showed me a sample "Share Transfer Form". It doesnot have the word '7B' mentioned anywhere on it. Also the issuing Authority is - Henry Williams, Bombay Stock Exchange (In Red Rubber Stamp). Interestingly the Date Stamp which is also in the form of Red Round Rubber Stamp (DD.MM.YYYY) has the MM in Roman Characters. Hope this is universal and acceptable to ROC at all the cities. Please comment if not true.
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