27 July 2022
can a private limited sold with 94% shareholding. what are the provisions under Companies Act, 2013 to sell a private limited company. Which forms we have to fill for this process?
11 July 2024
Yes, a private limited company can be sold, including the sale of majority shareholding (like 94% shareholding) to another entity or individual. Here’s a general outline of the provisions under the Companies Act, 2013, and the forms typically involved in the process:
### Provisions under Companies Act, 2013:
1. **Approval of Board of Directors**: The Board of Directors of the company must first approve the sale of shares. This approval typically includes consideration of the terms of sale and any conditions attached.
2. **Shareholders’ Approval**: Depending on the articles of association of the company and the terms of any shareholders’ agreement, shareholder approval may be required for significant transactions such as the sale of a majority stake.
3. **Valuation of Shares**: It’s common practice to get the shares valued by a registered valuer before selling them, especially in cases where the sale involves a substantial portion of the company’s shareholding.
4. **Compliance with Statutory Requirements**: Ensure compliance with all statutory requirements under the Companies Act, 2013, including provisions related to transfer of shares, payment of stamp duty, and any regulatory filings.
### Steps and Forms Involved:
1. **Board Resolution**: Obtain a board resolution approving the sale of shares. This resolution should detail the terms and conditions of the sale.
2. **Share Purchase Agreement (SPA)**: Prepare a Share Purchase Agreement between the seller(s) and buyer(s), outlining the terms of sale, price, warranties, and other relevant details.
3. **Filing with ROC**: File necessary forms with the Registrar of Companies (ROC). The forms typically involved include:
- **Form MGT-14**: For filing resolutions and agreements with ROC within 30 days of passing the resolution. - **Form SH-4**: For transfer of shares from seller to buyer(s). - **Form PAS-3**: For filing details of the share capital and shareholders post-sale.
These forms need to be filled accurately and submitted along with the required documents and payment of requisite fees.
4. **Intimation to Income Tax Authorities**: Inform the Income Tax Authorities about the transfer of shares as per Section 56 of the Income Tax Act, 1961, to comply with tax implications.
5. **Stamp Duty**: Pay stamp duty on the share transfer instrument as per the relevant state’s stamp duty laws.
6. **Update Records**: Update the records of the company, including the register of members and other statutory registers, to reflect the change in shareholding.
### Additional Considerations:
- **Legal and Tax Advice**: Seek legal and tax advice from professionals to ensure compliance with all applicable laws and to mitigate any potential risks associated with the sale.
- **Due Diligence**: Conduct due diligence on both the buyer and the seller(s) to ensure transparency and mitigate risks.
- **Regulatory Compliance**: Ensure compliance with sector-specific regulations, if any, that may apply to the company.
Each transaction may have unique aspects depending on the specifics of the sale. Therefore, it’s advisable to consult with a qualified company secretary or legal advisor who can provide guidance tailored to your specific situation and ensure smooth compliance with all legal requirements under the Companies Act, 2013.
CAclubindia
