If a member of a Private Company wants to transfer shares to another existing member of the same Company, does the private company need to give notice to the existing members offering the shares first. The Articles provide that the shares cannot be transfered unless it is offered to existing members. Is the formality of offering the shares to the existing restricted to the cases where the shares have to be transfered to an outsider or it is applicable even if it is being transfered to an existing member.
30 November 2011
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.
30 November 2011
Mr. Richnak has explained the procedure well. In terms of Section 3(1)(iii), a private Company is required to restrict the right of transfer its shares by its articles.
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