Change in shareholding

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 November 2011 Dear Sir,
Pls provide in details process to change the share holding pattern of pvt. ltd. company. i.e. remove the name of certain existing Share holder & increase the Share holding of other S.H.
Pls also suggest formalities of ROC in details.

Thanks

Rahul

Srirang Mahabhagwat

Srirang Mahabhagwat (Expert)
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10 November 2011 Dear Rahul in reference to the provisions of Section 108 of the Companies Act, 1956 a a person can transfer his/her shareholding in the Company to another by complying the provisions
1. Executing the Share Transfer Forms.
2. Lodging the forms along with the Share Certificates with the Company.
3. Passing a Board Resolution by the Directors to effect and register the transfers.
4. Endorsement on the share certificates.

You can go through the detail provision in the Companies Act Section 108 and its sub sections.
However please note that in case of Foreign transfer you will have to file FIRC Reporting and FCTRS Documents with the RBI.
Please note that this is only in the case of voluntary transfer by a member. Incase of removal by the Company against the action of the shareholder there are different norms

Please correct if something wrong.

RG - A Helping Hand

RG - A Helping Hand (Expert)
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10 November 2011 In a private company by way of share transfer you can transfer entire shareholding of one person to another person.

SHARES TRANSFER IN A PRIVATE COMPANY

Restriction in Private company on the right to transfer its shares [Section 3(1)(iii)]
Section 3(1)(iii)(a) of the Companies Act, 1956 provides that the Articles of a private company shall restrict the right to transfer the company's shares. Normally 100% shareholding of a private company may be owned by a family or other private group.

Cases where Restriction on transfer not applicable
Restriction upon transfer of shares in private company not applicable in the following cases:—
(i) on the right of a member to transfer his/her shares to his/her representative(s).
(ii) in the event of death of a shareholder, legal representatives may require the registration of share in his/her name.

Procedure for transfer of shares of private company
Transfer of shares in a private company is governed by AOA. Some steps followed by a private company to give effect to the transfer of shares are as follows:—

(i) Transferor should give a notice in writing to the company for his intention to transfer his share.
(ii) The company in turn notify to other members as regards the availability of shares and the price at which such share would be available to them along with the time limit within which they should communicate their option to purchase shares on transfer.
(iii) Such price is generally determined by the directors or the auditors of the company.

If none of the members comes forward to purchase shares then the shares can be transferred to an outsider and the company will have no option, other than to accept the transfer.

RG - A Helping Hand

RG - A Helping Hand (Expert)
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10 November 2011 Checklist to be followed for transfer of shares
(i) Arrange share transfer deed (Form 7B). It should be endorsed by the prescribed authority. This deed can also be used for the transfer of debenture.
(ii) Get the transfer deed duly executed both by the transferor and the transferee as desired by sections 108 and 109 of the Act and the Articles of Association.
(iii) The transfer deed should bear stamps according to the Indian Stamp Act and Stamp Duty Notification in force in the State concerned. The present rate of transfer of shares is 25 Paise for every one hundred rupees of the value of shares or part thereof.
(iv) Do not forget to cancel the stamps affixed on the transfer deed at the time or before signing of the transfer deed.
(v) The signatures of the transferor and the transferee in the share transfer deed must be witnessed by a person giving his signature, name and address.
(vi) Attach the relevant share or debenture certificate or allotment letter with the transfer deed and deliver the same to the company within the time limits.
(vii) Where the application is made by the transferor and relates to partly paid-up shares, the company has to give due notice of the amount due on shares/debentures to the transferee and the transferee shall raise objection, if any within two weeks from the date of receipt of the said notice.
(viii) If signed transfer deed has been lost, affix the same stamp on a written application. In such case, the Board may, if it thinks fit to do so, register the transfer on such terms of indemnity as it thinks fit.