Transfer of shares in a private limited company
This query is : Resolved
27 July 2013
A client has bought shares in a private limited company. She is an existing shareholder as well as a director in the company.The board of directors refused to pass a resolution approving the transfer.
What steps ,if any, can she take in the said situation?
Thanks.
What steps ,if any, can she take in the said situation?
Thanks.
28 July 2013
Hi
If transfer documents is properly executed and is in accordance with law then the Board can not refuse the transfer.
If transfer documents is properly executed and is in accordance with law then the Board can not refuse the transfer.
28 July 2013
Power of directors to refuse transfer of shares:
Section 111(13) of the Act, contains provisions regarding the power of directors to refuse registration of transfer of shares which says that, "Nothing contained in this section and section 108, 109 or 110 shall
prejudice any power of a private company under its articles to enforce the restrictions contained therein against the right to transfer the shares of such company."
The Articles of private company contain provisions to restrict the transfer of its shares, so a wide discretion is vested in directors to refuse transfer and empowering the Board of directors to refuse to register transfers on any ground even without assigning any reason.
Thus, if the Articles empower the directors to refuse registration, if they do not approve of the transferor or transferee, they may do so only if they have some personal objection to the transferee, and it is not sufficient that they consider that the number of shares transferred to him is too small.
If a private company refuses to admit a person as a member by reason of the fact that the articles contain provisions to the effect that, if another member is willing to acquire the shares available for transfer, such member shall have priority over the outsider, in this situation the Company Law Board/Tribunal cannot find that such decision to decline admission to the outsider is improper or arbitrary or oppressive. The anxiety of the company to prefer a member or an outsider, to hold the shares subject of transfer, cannot be considered unreasonable or capricious. [Chandran (PV) v Mabar and Pioneer Hosiery P. Ltd. (1988) 2 Comp LJ 146 (Ker)].
If the Articles permit the directors to decline to register transfer of shares without stating the reasons, the Company Law Board/Tribunal would not draw unfavourable inference against the directors because they did not give reasons and the Company Law Board/Tribunal may assume that the directors acted reasonably and bona fide and those who allege to the contrary would have to prove and establish the same by evidence. However, if the directors gave reasons, the Company Law Board/Tribunal would consider whether they were legitimate and whether the directors proceeded on a right or wrong principle.
Therefore, while refusing to register transfer of shares, it is necessary that the directors must act in a good faith and for the benefit of a company and shareholders and not for some other purpose.
Power of refusal to register transfer of shares should be exercised strictly on the grounds specified in the Articles and not on the basis of any other grounds.
Power of directors to refuse transfer of shares:
Section 111(13) of the Act, contains provisions regarding the power of directors to refuse registration of transfer of shares which says that, "Nothing contained in this section and section 108, 109 or 110 shall
prejudice any power of a private company under its articles to enforce the restrictions contained therein against the right to transfer the shares of such company."
The Articles of private company contain provisions to restrict the transfer of its shares, so a wide discretion is vested in directors to refuse transfer and empowering the Board of directors to refuse to register transfers on any ground even without assigning any reason.
Thus, if the Articles empower the directors to refuse registration, if they do not approve of the transferor or transferee, they may do so only if they have some personal objection to the transferee, and it is not sufficient that they consider that the number of shares transferred to him is too small.
If a private company refuses to admit a person as a member by reason of the fact that the articles contain provisions to the effect that, if another member is willing to acquire the shares available for transfer, such member shall have priority over the outsider, in this situation the Company Law Board/Tribunal cannot find that such decision to decline admission to the outsider is improper or arbitrary or oppressive. The anxiety of the company to prefer a member or an outsider, to hold the shares subject of transfer, cannot be considered unreasonable or capricious. [Chandran (PV) v Mabar and Pioneer Hosiery P. Ltd. (1988) 2 Comp LJ 146 (Ker)].
If the Articles permit the directors to decline to register transfer of shares without stating the reasons, the Company Law Board/Tribunal would not draw unfavourable inference against the directors because they did not give reasons and the Company Law Board/Tribunal may assume that the directors acted reasonably and bona fide and those who allege to the contrary would have to prove and establish the same by evidence. However, if the directors gave reasons, the Company Law Board/Tribunal would consider whether they were legitimate and whether the directors proceeded on a right or wrong principle.
Therefore, while refusing to register transfer of shares, it is necessary that the directors must act in a good faith and for the benefit of a company and shareholders and not for some other purpose.
Power of refusal to register transfer of shares should be exercised strictly on the grounds specified in the Articles and not on the basis of any other grounds.
31 July 2013
First of all you should see the articles of association of the company if there is any restriction on transfer of share then that provisions has to be looked into and no other act will come into play as the Articles of Association is above all the laws within the frame work of the companies Act.
If there is no restriction then first take transfer form, filup the name of the company, number of shares and consideration then get it franked by paying the stamp duty.
The fill up the form properly and execute it so that there is no chance of refusal.
Send it along with share certificates to the registered address of the company by Registered A/D and wait for few days then remind the company.
If no transfer is done then you have to complain to ROC.
The other provisions has been given by the experts which will be applicable
If there is no restriction then first take transfer form, filup the name of the company, number of shares and consideration then get it franked by paying the stamp duty.
The fill up the form properly and execute it so that there is no chance of refusal.
Send it along with share certificates to the registered address of the company by Registered A/D and wait for few days then remind the company.
If no transfer is done then you have to complain to ROC.
The other provisions has been given by the experts which will be applicable
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