06 November 2013
In a Private Limited Company A & B are 50% each Share holder. Now A & B want to transfer shares to Mr. C . From A 10% shares and B 10% shares transfer to C for some consideration.
What are the Procedure to transfer shares from A & B to C.
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)].
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