Generally, a private company is guided by its Article of Association. As per Section 2(68) of the Companies Act 2013, a Private Company restricts the transfer of its shares and prohibits invitation to the public to subscribe to any securities of the Company.
Transfer of Shares
As per Section 56 of the Companies Act 2013, Company shall not register any transfer of securities, unless a proper instrument of transfer, duly stamped, dated, and executed by or on behalf of Transferor and Transferee is sent to the Board within 60 days of the execution of the instrument of the transferor, along with the Share certificate or Letter of allotment as the case may be.
Practical Steps
Intimation
Transferor(s) and/or Transferee(s) need to intimate to the company of the intention to transfer shares.
Form
Transferor(s) and/or Transferee(s) need to execute the instrument of transfer as per Rule 11 of the Companies Act 2013 in "Form SH-4". The same should be duly stamped as per the Indian Stamp Act, 1899 with stamp duty (currently 0.25%) paid on market value or consideration amount, whichever is higher.
Note: Now the Presentation of the instrument of transfer to the prescribed authority (ROC) is not required.
Share Certificate or Letter of Allotment
A share certificate must be lodged with the company, or if no such share certificate exists then a letter of allotment must be lodged with the company along with the instrument of transfer.
Board meeting and Resolution
The company shall duly hold a board meeting as per Section 173 for approving the share transfer and passing the appropriate resolution. The Company shall also be guided by its Articles as to the requirement of holding a Board Meeting.
Intimation to the transferee in case of partly paid shares
If only the Transferor has applied for the transfer of the shares which are partly paid then, the company will send notice to the transferee in Form SH-5, if the transferee gives no objection within two weeks from the date of receipt of notice then Board shall proceed further.
Rejection or Acceptance
Whereby virtue of Sec 58 of the Companies Act 2013 and AoA, Board has the power to decline the transfer, the private company may refuse to register the transfer in this case and send notice to the Transferor/ Transferee/ person giving intimation within 30 days from the date when the instrument of transfer was delivered to the company, stating reasons for refusal. Further, if the company accepts and registers the transfer then it shall issue a Share Certificate within one month from the date of receipt of the instrument of transfer in the name of the Transferee and shall make necessary changes in the Register of Members.
Notice to ROC
No such Notice or intimation is required to be given to ROC. The Share Transfer details shall be given to ROC in the Annual Return of the company in Form MGT-7.
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