Transfer of shares in favour of existing and new appointed directors

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This query is : Resolved

lingam (Querist)

03 February 2024 Dear Sir,

We are into a private limited company 2 directors are resigned from the company kindly confirm to transfer the shares NAV is required from the CA and when this came to effect.

Thanks and Regards
Lingam

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

11 July 2024 In the context of transferring shares when directors resign from a private limited company, here are the key points to consider regarding Net Asset Value (NAV) and the effective process:

### Transfer of Shares When Directors Resign

1. **Board Resolution**:
- The first step is for the board of directors to pass a resolution accepting the resignation of the directors. This resolution should be recorded in the minutes of the board meeting.

2. **Transfer of Shares**:
- If the resigning directors hold shares in the company, they may transfer their shares to other existing shareholders or new shareholders.
- The transfer process typically involves executing a Share Transfer Deed (Form SH-4) between the transferor (resigning directors) and the transferee (new shareholders).
- Ensure that all necessary documentation, including the Share Transfer Deed and board resolution, is completed and signed by both parties.

3. **Net Asset Value (NAV)**:
- Net Asset Value (NAV) refers to the value of the company's assets minus its liabilities.
- In the context of transferring shares, NAV may be relevant if there is a consideration involved in the transfer of shares. It helps determine the fair value of the shares being transferred.
- A Chartered Accountant (CA) may be engaged to calculate or provide a valuation of the company's assets and liabilities to determine the NAV per share.
- However, NAV is not always required if the transfer is without consideration or if the shares are transferred at par value or book value (as per the company's books).

4. **Effective Date**:
- The effective date of the transfer of shares is typically the date on which the Share Transfer Deed (Form SH-4) is executed and signed by both parties.
- Ensure that the transfer is properly documented, filed with the Registrar of Companies (ROC), and updated in the company's shareholder register.

### Additional Considerations:

- **Legal Compliance**: Ensure that the transfer of shares complies with the provisions of the Companies Act, 2013, and the company's Articles of Association.

- **Stamp Duty**: Depending on the state where the company is registered, stamp duty may be applicable on the transfer of shares. Verify and pay the stamp duty as required.

- **Professional Advice**: It's advisable to seek guidance from a qualified Company Secretary or lawyer to ensure all legal and procedural requirements are met during the transfer process.

By following these steps and considerations, the transfer of shares from resigning directors to other shareholders can be effectively managed, ensuring compliance with applicable laws and proper documentation of the transaction.

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