Transfer of shares in case the partnership firm is a member in private limited company

This query is : Resolved

Jayalakshmi Ramasamy (Querist)
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14 March 2024 Dear Sir/Madam,

Our Company XYZ PVT. LTD. is a private limited company having individuals, corporate body and partnership firm as members. Now one of the partners had died and we had re-consituted the new partnership firm with new partners. So how to go about for the transfer of shares in case of the company . Kindly advise if SH4 is required to be filed and the board resolution to be passed alongwith the stamp duty if any to be paid. Kindly advise with the procedure.

Thanks in advance.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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11 July 2024 In the scenario where a partner of a partnership firm that is a member of a private limited company (XYZ PVT. LTD.) has passed away, and the partnership firm has been reconstituted with new partners, the transfer of shares in the private limited company would typically involve the following steps:

### Steps to Transfer Shares in a Private Limited Company:

1. **Board Resolution**:
- The board of directors of XYZ PVT. LTD. will need to pass a resolution approving the transfer of shares from the deceased partner to the new partnership firm (with new partners).
- The board resolution should explicitly mention the details of the transfer, including the name of the deceased partner, the new partnership firm (with new partners), and the number of shares being transferred.

2. **Share Transfer Deed (Form SH-4)**:
- Form SH-4, also known as the Share Transfer Deed, is required to be executed for transferring shares from the deceased partner to the new partnership firm.
- The SH-4 form should be duly filled out with details such as the names of the transferor (estate of the deceased partner) and transferee (the reconstituted partnership firm), number and class of shares transferred, consideration (if any), and date of transfer.
- The form must be signed by both parties (transferor and transferee) and stamped as per the Stamp Act (stamp duty may apply).

3. **Board Meeting and Minutes**:
- Convene a board meeting of XYZ PVT. LTD. to discuss and approve the share transfer.
- Prepare minutes of the board meeting recording the discussions and the resolution passed for the transfer of shares.

4. **Filing with Registrar of Companies (ROC)**:
- File Form SH-4 along with the necessary attachments (such as the board resolution, share transfer deed, and proof of payment of stamp duty) with the ROC within 60 days from the date of execution of the share transfer deed.
- Ensure all documents are submitted in the prescribed format and pay the requisite filing fee.

5. **Stamp Duty**:
- Stamp duty is applicable on the transfer of shares and varies depending on the state where the registered office of XYZ PVT. LTD. is located.
- Calculate the stamp duty payable based on the value of consideration (if any) or as per the prescribed rates under the Stamp Act of the respective state.

6. **Updating Shareholder Register**:
- After approval and filing, update the shareholder register of XYZ PVT. LTD. to reflect the transfer of shares from the deceased partner to the new partnership firm.
- The new partnership firm (with new partners) will now be recorded as the holder of the shares previously held by the deceased partner.

### Additional Considerations:

- **Legal Advice**: It's advisable to seek legal advice from a qualified company secretary or lawyer to ensure compliance with all legal requirements and to handle any specific nuances or complexities that may arise in the transfer process.

- **Documentation**: Keep copies of all documents, including the board resolution, share transfer deed (Form SH-4), minutes of the board meeting, and proof of payment of stamp duty, for record-keeping and future reference.

By following these steps and ensuring compliance with applicable laws and regulations, XYZ PVT. LTD. can effectively transfer the shares from the deceased partner to the reconstituted partnership firm with new partners.