Transfer of shares to others in pvt company

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 November 2013 the Directors who are shareholders of the abc PVt. Ltd. which is further the Holding Company of the other Pvt. Co and that subsidiary co is the promoter holder of Listed Company. can the directors of abc transfer their shares freely? does SAST regulations comes into picture here? are the compliances under SAST act required to be made in this case? kindly guide with the procedure which can be followed in this case.
it will be of great help.

Ajay Mishra

Ajay Mishra (Expert)
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17 November 2013
PROCEDURE FOR TRANSFER OF SHARES OF PRIVATE COMPANY

Generally articles contain the detailed provisions as regards the procedure for transfer of shares. Usually following steps shall be followed by a private company to give effect to the transfer of shares:—
(i) Transferor should give a notice in writing for his intention to transfer his share to the company.
(ii) The company in turn should notify to other members as regards the availability of shares and the price at which such share would be available to them.
(iii) Such price is generally determined by the directors or the auditors of the company.
(iv) The company should also intimate to the members, the time limit within which they should communicate their option to purchase shares on transfer.
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.
(V) the transferor will submit the following documents with company:
(a) Original Share certificate
(b) Transfer deed (Form-7B) properly executed with stamp duty of proper amount.
© any other documents relating thereto.

It is to be noted that any transfer of shares to an outsider without complying with the procedure as specified in the articles for effecting transfer of shares will not be operative against the company. Even in the case where the procedure prescribed by the articles was not followed and such failure was not due to any fault on the part of the selling shareholder, the transfer to an outsider was held not to be effective.

Transfer of shares without consent of holder of shares and without prior sanction of board of directors as required under articles of association of a private company concerned could not be held to be valid. [John Tinson Co. (P) Ltd. v Mrs. Surjeet Malhan (1997) 88 Comp Cas 750 (SC)].

Querist : Anonymous

Querist : Anonymous (Querist)

18 November 2013 Thank you Sir for your reply but my issue is a person wants to purchase the shares of Pvt. ltd Co which has a listed company as its step subsidiary. so will the person will b free to acquire the Shares of that Private Co he intends to acquire by process you mentioned above or will SAST and takeover Code ad Listing Agreement and all will come into picture here? if yes then how and what will be the acquirer required to disclose and comply with to carry out this transaction

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Ajay Mishra

Ajay Mishra (Expert)
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18 November 2013 The only restriction is a subsidiary company can not purchase shares of its holding company.

Querist : Anonymous

Querist : Anonymous (Querist)

18 November 2013 Sir i feel you still not getting my point Subsidiary is not acquiring shares of Holding Co. person is aquiring shares of Holding Co. which has Listed Company as its Subsidiary Co.

Ajay Mishra

Ajay Mishra (Expert)
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18 November 2013 No problem, he can.

Querist : Anonymous

Querist : Anonymous (Querist)

18 November 2013 Thank you Sir

Ajay Mishra

Ajay Mishra (Expert)
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18 November 2013 My Pleasure............

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