10 June 2009
A minority shareholder of a private limited company is resigning due to difference in opinions & views with the majority, so what is he entitled to receive from that company like value of his share, percentage in net worth, etc???
21 July 2025
Sure! Here’s a bit more clarity on the resignation or exit of a minority shareholder and what they’re entitled to:
1. Legal Provisions & Sections Companies Act, 2013 does not specifically provide a 'resignation' right for shareholders, because shareholders do not ‘resign’ like directors or employees. They can transfer or sell their shares if allowed by the Articles of Association (AoA) or shareholders’ agreement.
The valuation and payment for shares depend on:
The Articles of Association (AoA) of the company.
Any Shareholders' Agreement (if applicable).
If no agreement, the value may be decided mutually or through a valuation by a registered valuer.
For buyback or transfer of shares, relevant provisions include:
Section 68 (Buy-back of shares)
Section 56 (Transfer of shares)
Section 232 (Compromise, arrangement, and amalgamation) may also be invoked in some cases.
2. Valuation Method Typically, the valuation includes:
Net Asset Value (NAV) or Book Value per share (assets minus liabilities).
Goodwill or future benefits if agreed.
Sometimes discounted value if the shareholder is minority or for other restrictions.
3. Process The shareholder wishing to exit should offer shares to the existing shareholders first (Right of First Refusal) as per AoA or agreement.
The purchase price is negotiated or decided by a valuer.
Once price agreed, shares are transferred and consideration paid.
4. Summary Minority shareholder cannot claim “dues” like salary or dividends unless declared.
Entitled to payment for shares they hold based on valuation and agreement.
No specific statutory section governs ‘resignation’ of shareholders; it's governed by AoA/shareholders agreement and company law provisions relating to transfer and buyback.
CAclubindia
