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Transfer of Shares and Controlling Interest

S B C (Director) (27 Points)

25 February 2011

Dear Everybody,

I have a question to ask.

Say A company XYZ (P) Ltd, X holds 52% of the shares, Y holds 13% of the shares and Z holds 35% of the shares. As Mr.X holds 52% of the shares the controlling rights will come to him. The articles allows the members to transfer the shares to his/her relatives. If Mr.Z transfers his shares to his 10 relatives, then will it be any threat to the controlling power of X, IN ANY CASE?

If X,Y,Z are the directors of the company, if Mr. X finds Y and Z are against him personally, what can Mr.X do to regain his powers in a board meeting?

Appreciate your help on this.

Regards,

SBC

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1 Replies

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 04 March 2011

Mr. X holds majority i.e. 52% shares with him. So no major dicisions of the company can be made without his consent.

There are 3 directors and 2 are against X. For the Board Meeting quorum requirement would be 2 and hence these 2 directors will, in effect control the Board and the day to day affairs of the company which is a major threat.

Z transfering his existing shares to his relatives will not pose any threat. However ensure that X shareholding does not fall below 52%. The other 2 directors may try to bring this down by way of alloting new shares if the company has sufficient Authorised Share Capital.