Sale of shares in private ltd company

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 August 2013 Hi,
An XYZ Pvt Ltd has 3 directors. The company is selling 30% of their shares to another person Mr.ABC with equal share from each director(10% each). Share value is identified and agreed on both the sides.

The understanding between the company and the intended new director is that the price identified is for buying stake in the company and any further investments will be shared among the directors (all 4 of them) according to their stake ratio.

Now, once Mr.ABC pays the agreed price for stake in the company and all legal procedures are followed, can the existing directors of XYZ Pvt. Ltd. can take out their respective legal 10% stake value received from Mr.ABC.

Please let me know. Thanks in advance.

Thanks

Ajay Mishra

Ajay Mishra (Expert)
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30 August 2013 Hi

Please confirm, the company is selling own 30% shares to others.

Querist : Anonymous

Querist : Anonymous (Querist)

30 August 2013 Mr. Ajay Mishra,

The 3 directors started this company and they plan to bring in new director, so as to allow them to encash some amount for their personal life and get another hand to bring up the company to the next level.

So, yes the company is selling their own 30% stake to one new person..

Ajay Mishra

Ajay Mishra (Expert)
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30 August 2013 Sorry, i did not get your query.

Querist : Anonymous

Querist : Anonymous (Querist)

30 August 2013 The 3 directors sell their share of 30% to a new person who becomes the new 4th director. The new director has agreed to pay say 10Lakhs for 30% stake.

Can the existing directors take the said 10Lakhs out..

(as the new director is buying the stake and they agree to bring in investment for any future project according to their stake ratio).

Ajay Mishra

Ajay Mishra (Expert)
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30 August 2013 Yes they can take the shares from existing members.

You are using the terms director always. The directors who are also members of the company transfer some shares to new director to become a shareholders.

For this every director will execute transfer deed with such new director to transfer their shares to him.

Querist : Anonymous

Querist : Anonymous (Querist)

30 August 2013 Mr.Ajay Mishra,

Thanks for the clarification. I'm sorry for not using the exact words and for being vague.

So, the existing 3 directors after execution of the transfer deed can consider the money received (from the 4th person) for such transfer as their own personal money..right?

Ajay Mishra

Ajay Mishra (Expert)
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30 August 2013 Hi

Yes, it will be the own personal money of shareholders from new member who intended to take shares from them.

Ajay Mishra

Ajay Mishra (Expert)
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30 August 2013
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)].

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Querist : Anonymous

Querist : Anonymous (Querist)

30 August 2013 Hi Mr. Ajay Mishra,

Thanks for your detailed clarification and information.

Ajay Mishra

Ajay Mishra (Expert)
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10 September 2013 My Pleasure............

Message likes : 1 times

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