Transfer of share in a private company

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Anumita Sharma (Querist)
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25 October 2012 we want to transfer shares from one director to the other person.what is the requirement under companies act and what steps should be followed?

Kindly provide me the format of required letters.

Ajay Mishra

Ajay Mishra (Expert)
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25 October 2012 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.
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)].

Regards

Ajay Mishra

Ajay Mishra (Expert)
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25 October 2012 SPECIMEN OF APPLICATION FOR TRANSFER OF SHARES

Dated:

To,
The Board of Directors
………….. Limited 117,
Address:

Sub: Transfer of 2,500….. Equity shares held by Mr. X

Ref.: L.F. No. .............

Dear Sir(s),

I have to inform that Mr. X was holding ……2,500 Equity Shares of Rs. 10 each dully fully paid up in the company under L.F. No. ........ Details of the Equity Shares being given hereunder:
Sl. No.
Certificate No.
Dist. No No. of Shares From .….... to.....
I, hereby submit the following documents for transfer of 2,500 Equity Shares in my name:
1. Copy of Transfer Deed.
2. Copy of PAN.
3. Original share certificates.
4. Specimen signatures of mine.
Kindly consider and arrange for transfer of the above said shares in my favour as earliest and oblige.
Thanking you.
Yours faithfully

(Mr. Y……….............)

Encl.: a/a

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Anumita Sharma

Anumita Sharma (Querist)
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25 October 2012 Thanks Mr. Ajay....can you inform me that is there any specific format of the notice given by the shareholder and company?

Anumita Sharma

Anumita Sharma (Querist)
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25 October 2012 Thanks alot for your quick response.
Have a great day.

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