Change of ownership of private company

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Abilash (Querist)
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01 January 2013 A private company is having 4 shareholders. They are transferring their shares to another 4 persons. what shall be the procedures to be followed.

Ajay Mishra

Ajay Mishra (Expert)
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01 January 2013 Hi

PROCEDURE FOR TRANSFER OF SHARES OF PRIVATE COMPANY

Generally articles contain the detailed provisions as regards the procedure for transfer of shares. Usually following steps shall be followed by a private company to give effect to the transfer of shares:—
(i) Transferor should give a notice in writing for his intention to transfer his share to the company.
(ii) The company in turn should notify to other members as regards the availability of shares and the price at which such share would be available to them.
(iii) Such price is generally determined by the directors or the auditors of the company.
(iv) The company should also intimate to the members, the time limit within which they should communicate their option to purchase shares on transfer.
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.
(V) the transferor will submit the following documents with company:
(a) Original Share certificate
(b) Transfer deed (Form-7B) properly executed with stamp duty of proper amount.
© any other documents relating thereto.

It is to be noted that any transfer of shares to an outsider without complying with the procedure as specified in the articles for effecting transfer of shares will not be operative against the company. Even in the case where the procedure prescribed by the articles was not followed and such failure was not due to any fault on the part of the selling shareholder, the transfer to an outsider was held not to be effective.
Transfer of shares without consent of holder of shares and without prior sanction of board of directors as required under articles of association of a private company concerned could not be held to be valid. [John Tinson Co. (P) Ltd. v Mrs. Surjeet Malhan (1997) 88 Comp Cas 750 (SC)].

Abilash

Abilash (Querist)
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01 January 2013 Sir

Any procedure with ROC?

Ajay Mishra

Ajay Mishra (Expert)
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01 January 2013 Hi

No, Only Annual Return will be send in which all transfer details should be mentioned and the list of new Shareholders should be given in such return.

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