Transfer of share in private company

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CA. Ankit Bhandari (Querist)
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21 March 2012 What will be the legal consequences when we transfer shares from one SH to other & transfer is taking place below the price on which originally shares were alloted i.e. below the market price.

Ankur Garg

Ankur Garg (Expert)
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21 March 2012 Valuation of share for the purpose of transfer of shares of a private company

Normally Articles of a private company contain provisions in this regard and provides that the shares are to be sold at a fair price determined by directors or the company's auditors.

In fact it is the discretion of shareholder to sold his shares at his desired price. This price may be Re. 1. However it is easily possible in case of a public company. But in case of a private company directors may compel the shareholder to transfer shares at a fair price determined by directors or the company's auditors. Reason being in a private company shares are not freely transferable.

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CA. Ankit Bhandari

CA. Ankit Bhandari (Querist)
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21 March 2012 Thanks alot sir.
Sir further i would like to ask and confirm with you some implications.
suppose we have issued share at Rs. 500/- having face value of Rs. 100/- & now we want to transfer it to one of the director of the company then is their any problem in companies act or income tax act either to transferor or to the director.

Ajay Mishra

Ajay Mishra (Expert)
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21 March 2012 Hi

In Companies Act, there is no issue on transfer of shares to director.

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CA. Ankit Bhandari

CA. Ankit Bhandari (Querist)
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22 March 2012 ok thanks sir...
can any one throw light on implications in IT act, for the director and for the transferor?

HONEY AHUJA

HONEY AHUJA (Expert)
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24 March 2012 If you are purchasing shares at the rate less than its F.V (in case of Unlisted Companies take B.V.) then it will income under the heading other source in the hands of Transferee.

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CA. Ankit Bhandari

CA. Ankit Bhandari (Querist)
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24 March 2012 sir please elaborate.what amount will be taxable to he transferee, difference between B.V. & F.V.?

HONEY AHUJA

HONEY AHUJA (Expert)
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24 March 2012 Suppose Fair value or book value is Rs. 15 and transfer value is Rs. 12 then Rs. 3 will be income of Transferee.

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CA. Ankit Bhandari

CA. Ankit Bhandari (Querist)
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24 March 2012 Ok thanks alot honey sir...

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