Sale of shares

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 February 2013 If a company holding 80 or 90% shares of a Pvt. Ltd company wants to sale these shares to one of its director.... what would be the statutory compliance? Will Board resolution be enough for such sale or Extraordinary General meeting need to be called?

Ajay Mishra

Ajay Mishra (Expert)
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12 February 2013 Hi

The Board resolution will be sufficient to give effect for this sale.

This will be cover under section 292 of the companies Act, 1956.

Querist : Anonymous

Querist : Anonymous (Querist)

12 February 2013 company is subscriber to MOA and holding these 90% shares via nominee and the nominee is the same person whom company wants to sell its shares. Would this make any difference.

Querist : Anonymous

Querist : Anonymous (Querist)

13 February 2013 Pls reply and pls provide the format of Board Resolution for sale of such shares

Ajay Mishra

Ajay Mishra (Expert)
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13 February 2013 According to section 12, there should be at least two persons in case of private company and seven in case of public company.

If you will transfer such shares, then all shares will be held by one shareholder (nominee).

Querist : Anonymous

Querist : Anonymous (Querist)

13 February 2013 sir,there is one more shareholder holding 10% shares

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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23 July 2025 Here’s a clear explanation and guidance on the **sale of shares by a company holding 80-90% shares in a Pvt Ltd company to its director**, along with the statutory compliance and whether a Board resolution suffices or an EGM is required:

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### 1. **Statutory Compliance for Sale of Shares by a Company**

* When a **company (the shareholder)** holding majority shares in a private limited company wants to **sell those shares to one of its directors**, the transaction is essentially a **transfer of shares** from one shareholder (the company) to another person (director).

* Since the shares are **held by the company (a legal entity) and not individuals**, the company needs to **authorize the sale** of shares held by it.

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### 2. **Is Board Resolution Sufficient or EGM Needed?**

* Under **Section 292 of the Companies Act, 1956** (relevant then), **Board Resolution** is generally sufficient to approve the sale or transfer of shares held by the company in another company.

* There is **no mandatory requirement for an Extraordinary General Meeting (EGM)** unless the Articles of Association (AoA) of the company specifically require it.

* The **Board of Directors** has the power to **authorize sale/transfer** of investments or shares held by the company, so a Board Resolution is appropriate.

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### 3. **Special Situations: Nominee Shareholder Holding 90%**

* If the company is a **subscriber to the MOA and holds 90% shares via nominee(s)**, and the nominee is the **same person to whom the company wants to sell the shares**, this creates a scenario where shares are moving from the company to the nominee directly.

* **The nominee becomes a direct shareholder**, which is permissible provided the minimum number of shareholders as per Section 12 of the Companies Act, 2013 (which replaced the 1956 Act) is maintained.

* As per **Section 12(1)** of Companies Act, 2013:

* **Private company must have at least 2 shareholders** at all times.
* If another shareholder holds 10%, then even if the nominee/director holds 90%, the minimum requirement is met.

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### 4. **Summary of Compliance**

| Point | Compliance Requirement |
| --------------------------- | ------------------------------------------------- |
| Approval for sale of shares | Board Resolution sufficient |
| Shareholder meeting (EGM) | Not required unless AoA specifies |
| Minimum shareholders | At least 2 shareholders in private company |
| Transfer to nominee | Allowed, provided minimum shareholders maintained |

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### 5. **Sample Format: Board Resolution for Sale of Shares**

Here’s a concise template you can adapt:

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**BOARD RESOLUTION**

*“Resolved that pursuant to the provisions of the Companies Act, 2013 and the Articles of Association of the Company, approval of the Board be and is hereby accorded for the sale/transfer of \[number] equity shares held by the Company in \[Name of Pvt Ltd Company], representing \[percentage]% of its share capital, to Mr./Ms. \[Name of Director/nominee], at such price and on such terms and conditions as may be agreed upon.*

*Further resolved that Mr./Ms. \[Authorized Signatory], \[Designation], be and is hereby authorized to execute the Share Transfer Deed, deliver the share certificates, and do all such acts, deeds, and things as may be necessary to give effect to this resolution.”*

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If you want, I can help you draft a more detailed version tailored to your company’s specifics.

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Would you like assistance with that or any other related matters like share transfer agreement or filing procedures?

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