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Transfer of shares

SENTHIL SELVENDRAN (chartered accountant) (200 Points)

02 August 2011

One of my client Private Limited company, in which 3 directors and also shareholders of the company. Now out of the 3 directors two of them transfer their entitre shares to another director shareholder.

1.Is it possible to transfer entire shares of the two directors to the remaining one director.

2.If yes what is the procedure.

3.In AoA there is no clause of qualification shares

4.what are the documents to be executed

5.Till now there is no printed share certifcate for each of them

6.Suggest me the whole procedures.

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3 Replies

AMIT MISHRA (Legal Professional) (393 Points)
Replied 03 August 2011

Hi Senthil,

As per my knowledge section 266 of the Companies Act relating to qualification shares does not apply to a Private Limited Company. Thus the directors are not required to hold the same as the articles also dont talk about it. Do ensure the minimum number of members does not go below 2.

Procedure for transfer is as follows:-

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.

You need to arrange for the share certificates

Checklist to be followed for transfer of shares

(i) Arrange share transfer deed (Form 7B). It should be endorsed by the prescribed authority. This deed can also be used for the transfer of debenture.

(ii) Get the transfer deed duly executed both by the transferor and the transferee as desired by sections 108 and 109 of the Act and the Articles of Association.Affix stamps on the deed.

(iii) Mention the transfer on the back of shares.

(iv) The signatures of the transferor and the transferee in the share transfer deed must be witnessed by a person giving his signature, name and address.

(vi) Attach the relevant share or debenture certificate or allotment letter with the transfer deed and deliver the same to the company within the time limits.

(vii) Where the application is made by the transferor and relates to partly paid-up shares, the company has to give due notice of the amount due on shares/debentures to the transferee and the transferee shall raise objection, if any within two weeks from the date of receipt of the said notice.

(viii) If signed transfer deed has been lost, affix the same stamp on a written application. In such case, the Board may, if it thinks fit to do so, register the transfer on such terms of indemnity as it thinks fit.

Thanks & Regards

Amit Mishra

BSamrish & Co.

New Delhi