Demat of shares of a Pvt. Co.

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Sneha (Querist)
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05 April 2010 Hello,

If the shares of a Pvt. Co. are dematerialised, how does transfer of shares take place?

Since there is no free transferability, does the board pass any resolution before the RTA/DP accepts the shares or are the transfers ratified at the first board meeting held after transfer? or is there any other way?

Rasesh

Rasesh (Expert)
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06 April 2010 If there is no free transferability as per the AOA, then the company should give instructions to the RTA, not to process any request for demat of shares or share transfer application (for physical shares) without permission of the Company.

As regards shares that are already in demat mode, control over transfer would be next to impossible. For an off-line transfer of shares, the shareholder has to simply fill in the delivery instruction slip stating the details of the transferee and this would suffice.

Post such transfer, for change in the shareholding pattern, the board may ratify such transfer or may write to the buyer objecting the transaction. But again the chances of the matter going in favour of the Company are very remote.

Sneha

Sneha (Querist)
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07 April 2010 Thanks a lot. Even I am of the same idea but if the control of shares' transfer is impossible it defeats the purpose of a pvt co.'s 4 major clauses. How to handle this is what am not able to reason out

Rasesh

Rasesh (Expert)
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07 April 2010 I cannot think of any solution. Alternatively, amend the AOA putting restriction on the rights of any shareholder to transfer the shares without Board approval. If any transfer takes place without such approval, then you would have a case to fight.

Sneha

Sneha (Querist)
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07 April 2010 here th shares are held by a small group only so no issues with any likely dispute.. its jus th big lacunae that needs some attention.
thanks again

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