Can directors take profit of selling stakes in pvt ltd

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Querist : Anonymous

Querist : Anonymous (Querist)

28 August 2013 Hi, An XYZ Pvt Ltd has 3 directors. The company is selling 30% of their shares to another person Mr.ABC with equal share from each director(10% each). Share value is identified and agreed on both the sides. The understanding between the company and the intended new director is that the price identified is for buying stake in the company and any further investments will be shared among the directors (all 4 of them) according to their stake ratio. Now, once Mr.ABC pays the agreed price for stake in the company and all legal procedures are followed, can the existing directors of XYZ Pvt. Ltd. can take out their respective 10% stake value received from Mr.ABC. Please let me know.

Thanks in advance. Thanks

Ankit

Ankit (Expert)

28 August 2013 Since the entity you are talking of is a company, the assets belong to the company and can not be claimed by the shareholders...

it is possible only if it is done so by dividend distribution

Querist : Anonymous

Querist : Anonymous (Querist)

28 August 2013 Hi Mr. Ramesh Krishnan

First of all, thanks for your reply.I understand that the assets should stay inside the company.

But, how the directors/founders can cash out some amount for all their hard work and efforts during the past years. What is the dividend distribution, can you explain that please?

Thanks

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

29 August 2013 The company will have to declare dividend and distribute the same among all the shareholders.

Querist : Anonymous

Querist : Anonymous (Querist)

30 August 2013 Dividend declaration should happen before or after adding the new director?

If it is after dividend will be distributed among all 4..right?

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

30 August 2013 Dividend will be equally distributed among ALL the shareholders.

So in case there are 3 shareholders, dividend will be shared among the 3.

If new shareholder joins, dividend will be shared among 4.

Querist : Anonymous

Querist : Anonymous (Querist)

30 August 2013 Thanks for the clarification Mr. Siddhartha Bhardwaj

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

31 August 2013 You are welcome. You should use the thanks button to convey your thanks.

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