Can existing individual shareholder become a nominee shareholder by getting allotted new folio?

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priyanka * (Querist)
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05 May 2021 A public company has total 7 members. First 5 members are individuals which are not nominees of any body corporate i.e. A, B, C, D, E. 6th and 7th members are body corporate i.e. F and G. Now it is proposed to transfer G's shares to F. Now to fulfill the requirement of minimum 7 members, can we make any one member from A to E as a nominee of F by tranferring one share of G by alloting new folio number to such member and remaining shares to F?

Or we need to transfer one share to any new member i.e. H?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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06 July 2024 In the scenario you described, where a public company currently has 7 members including both individuals and body corporates, and you want to transfer shares from member G (a body corporate) to member F (another body corporate), the requirement is to maintain at least 7 members in total.

Here are the options you have:

1. **Transfer Shares to Existing Members (A to E)**:
- You can transfer some of G's shares to any of the existing members (A to E).
- This transfer can be structured such that the shares are transferred to one of these members as a nominee of F.
- This would involve transferring shares from G to a new member, which can be designated as a nominee of F.

2. **Transfer Shares to a New Member (H)**:
- Alternatively, you can transfer one share to a new member (H).
- This new member H would fulfill the requirement of having at least 7 members.
- This option is straightforward and ensures compliance with the minimum membership requirement.

**Considerations**:
- **Nominee Concept**: If you transfer shares to an existing member (A to E) as a nominee of F, it's crucial to ensure that the nominee relationship is correctly documented and compliant with the company's articles of association and applicable laws.

- **New Member (H)**: Introducing a new member (H) simplifies the structure, but you need to ensure all formalities are followed for admitting a new member, including issuing share certificates and updating the company's records.

**Conclusion**:
Both options are viable depending on your specific circumstances and the structure you wish to maintain. If the nominee structure is acceptable and properly documented, transferring shares to an existing member as a nominee of F can be done. Alternatively, introducing a new member (H) by transferring shares ensures straightforward compliance with the minimum membership requirement of 7 members. It's advisable to consult with legal and regulatory advisors to ensure compliance with all applicable laws and regulations during this process.

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