Transfer of shares in private company

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

14 March 2012 Frdz,

1. Does the transfer of shares in a private company require the board approval?

2. If yes, where in the Companies Act is it stated that the BOARD APPROVAL is mandatory?

3. Does the Act specifically state that the procedure for transfer should be/may be as per the AOA of the company? If yes where?

Ankur Garg

Ankur Garg (Expert)
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14 March 2012 1. Yes board approval is must. It is 100% sure.
2. Kindly go through section 108.
3. Basic procedure is given in section 108 itself.

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.

Valuation of share for the purpose of transfer of shares of a private company
Normally Articles of a private company contain provisions in this regard and provides that the shares are to be sold at a fair price determined by directors or the company's auditors.

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Ankur Garg

Ankur Garg (Expert)
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14 March 2012 Checklist to be followed for transfer of shares

(i) Arrange share transfer deed (Form 7B). It should be endorsed by the prescribed authority. This deed can also be used for the transfer of debenture.
(ii) Get the transfer deed duly executed both by the transferor and the transferee as desired by sections 108 and 109 of the Act and the Articles of Association.
(iii) The transfer deed should bear stamps according to the Indian Stamp Act and Stamp Duty Notification in force in the State concerned. The present rate of transfer of shares is 25 Paise for every one hundred rupees of the value of shares or part thereof.
(iv) Do not forget to cancel the stamps affixed on the transfer deed at the time or before signing of the transfer deed.
(v) The signatures of the transferor and the transferee in the share transfer deed must be witnessed by a person giving his signature, name and address.
(vi) Attach the relevant share or debenture certificate or allotment letter with the transfer deed and deliver the same to the company within the time limits.
(vii) Where the application is made by the transferor and relates to partly paid-up shares, the company has to give due notice of the amount due on shares/debentures to the transferee and the transferee shall raise objection, if any within two weeks from the date of receipt of the said notice.
(viii) If signed transfer deed has been lost, affix the same stamp on a written application. In such case, the Board may, if it thinks fit to do so, register the transfer on such terms of indemnity as it thinks fit.

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