Procedure to transfer share of private ltd co

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Querist : Anonymous

Querist : Anonymous (Querist)

26 September 2012 Hi

Please tell me Procedure to transfer share of Privte Limited company from one person to another. There are currently Two Shareholder/Director in Pvt Ltd Co. now they want to transfer share 50% share to two more person. After transfer Shareholding Pattern would be Equall to all four Shareholder.

Rohit Jain
Manager-Corporate Planning

Ajay Mishra

Ajay Mishra (Expert)
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26 September 2012 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.
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)].