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Issue & Transfer Of shares

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Share Transfer Procedure for Pvt Ltd Company

 

Share Transfer procedures in a Pvt Ltd Company is a systematic way of transferring the ownership of shares from one owner to the other. Shares are the units of ownership in a company, and they can be bought, sold, or transferred. The shares in a private limited company are not traded publicly, it can only be sold or transferred to others. File ROC compliances for Pvt Ltd Company with Monitrix.

 

The transfer of shares in a private limited company in India is governed by the Companies Act, 2013, and the rules and regulations prescribed by the Ministry of Corporate Affairs (MCA). In this blog post, we will discuss the procedure for share transfer in a private limited company.

 

 

Share Transfer Restrictions

 

In a Private Limited Company, the transfer of shares is restricted to the company's Articles of Association (AOA). The AOA must be reviewed before any share transfer process begins.

Restrictions on Shareholders' Right to Transfer Shares

 

  1. Rights of Pre-emption: If a shareholder wants to sell their shares, the shares must first be offered to other existing members of the company at a price determined by the Directors or the Auditor of the Company. The method for valuing shares is prescribed in the Articles of Association. If no existing shareholder is interested, the shares may be freely transferred to an outsider.
  2. Powers of Directors to Refuse: As per the provisions mentioned in the Articles of Association, a director may refuse to transfer shares to another person. The director has the power to take decisions on share transfers in a Pvt Ltd Company.

 

Only the restrictions specified in the Articles of Association are legally binding, and any private agreements between shareholders are not binding on the company or the shareholders. The right to transfer shares cannot be completely prohibited or banned, as it is not permissible under the law.

 

 

How to Transfer Shares in a Private Limited Company

 

The process of transfer of shares in a Private limited company is given below:

Step 1: Obtain Share Transfer Deed

The first step in the share transfer process is to obtain a Share Transfer Deed, which is a legal document that transfers the ownership of shares from the transferor (seller) to the transferee (buyer). The Share Transfer Deed should be executed by both parties and must be stamped and signed in accordance with the Indian Stamp Act, 1899.

The Share Transfer Deed should contain the following details:

    1. Name of the company
    2. Number and class of shares being transferred
    3. Name, address, and PAN of the transferor and transferee
    4. Consideration for the transfer of shares
    5. Date of execution

 

 

 

Documents Required for Share Transfer in Pvt Ltd Company

 


The following are the documents required for share transfer in a Private Limited Company:

              • Share Transfer Deed: This is the primary document required for share transfer and must be executed by the transferor and transferee.

              • Share Certificate: The original share certificate must be submitted by the transferor along with the share transfer deed.

              • PAN Card: A copy of the PAN Card of the transferee is mandatory for the transfer of shares.

              • Board Resolution: The Board of Directors of the company must approve the transfer of shares and pass a Board Resolution to that effect.

              • No Objection Certificate (NOC): The company may also require a NOC from the transferor stating that there is no objection to the transfer of shares.

              • Indemnity Bond: The transferor may be required to execute an indemnity bond indemnifying the company against any losses that may arise from the transfer of shares.

              • Payment of Stamp Duty: Stamp duty must be paid on the share transfer deed at the rate applicable in the respective state.

It is advisable to consult with a professional to ensure that all the necessary documents are in order and that the share transfer process is executed smoothly and in compliance with applicable laws and regulations. You may contact our team at Monitrix for the share transfer process and Company Incorporation.

 

 

Conclusion

 

In conclusion, the transfer of shares in a private limited company involves several steps and compliances. It is advisable to seek professional guidance and assistance to ensure compliance with the applicable laws and regulations and to avoid any legal issues or disputes. A company secretary or a legal monitrix can help you navigate the share transfer process smoothly and efficiently.

 

 

 

 

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