Transfer of shares
This query is : Resolved
01 February 2010
2 CO.S R DERE
I is public & other is pvt.
and d pvt. co. is subsidiary of public co.
now, public co. wants 2 transfer d shares of pvt. co. to its WTD & MD
CAN IT B POSSIBLE and if possible pls tell me the detailed procedure.
I is public & other is pvt.
and d pvt. co. is subsidiary of public co.
now, public co. wants 2 transfer d shares of pvt. co. to its WTD & MD
CAN IT B POSSIBLE and if possible pls tell me the detailed procedure.
02 February 2010
Yes it is possible. In your case transferor is public co. and transferee is WTD & MD.
Form-7B i.e. share transfer deed is required to be filled by transferee and transferor and lodge the same with pvt. co.
Stamp duty in the form of share tran stamp is also required to be paid.
Form-7B i.e. share transfer deed is required to be filled by transferee and transferor and lodge the same with pvt. co.
Stamp duty in the form of share tran stamp is also required to be paid.
02 February 2010
Please download my handout on Provision related to Transfer and Transmission of shares for the link given below:
https://www.caclubindia.com/forum/pcc-chapter-wise-law-notes-part-ii-49735.asp
https://www.caclubindia.com/forum/pcc-chapter-wise-law-notes-part-ii-49735.asp
02 February 2010
Thank You for your reply sir
but m still confused as whether this transfer will not be required to show under disclosure of interest of directors and if needs to be disclosed how to show it. what would be its effect on director's shareholding, if the public co. is a listed co. then what kind of sebi regulationd it needs to follow, which section of co.s act should be taken into consideration for this transfer?
whether public co. is allowed to transfer its shares to its directors or relatives?
but m still confused as whether this transfer will not be required to show under disclosure of interest of directors and if needs to be disclosed how to show it. what would be its effect on director's shareholding, if the public co. is a listed co. then what kind of sebi regulationd it needs to follow, which section of co.s act should be taken into consideration for this transfer?
whether public co. is allowed to transfer its shares to its directors or relatives?
02 August 2025
Great questions! Let me break it down clearly for you regarding the **transfer of shares by a public company (parent) to its WTD (Whole-Time Director) and MD (Managing Director) in its private subsidiary company**:
---
### 1. **Is it allowed?**
Yes, a **public company can transfer shares of its subsidiary (private company) to its directors (WTD & MD)**. There is no general prohibition under the Companies Act on such transfers.
---
### 2. **Legal provisions to consider:**
* **Companies Act, 2013** (or 1956 if older law applies):
* **Section 44** and **Section 56** deal with transfer of shares.
* Articles of Association (AoA) of the private company must be complied with regarding share transfer.
* Stamp duty on share transfer deed needs to be paid as per the state laws.
* **Disclosure of Interest (Section 184 of Companies Act 2013):**
* Directors are required to disclose their shareholding interests in the company (including subsidiaries).
* If the shares are transferred to directors, they must disclose their interest (direct or indirect) in the company in the prescribed format at Board meetings or Annual General Meeting.
* **SEBI Regulations (if the public company is listed):**
* The public company must comply with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
* Since the shares being transferred are in the **subsidiary (private) company**, the key aspect is disclosure of interests in subsidiaries by directors.
* If directors of the public company hold shares in the subsidiary, it must be disclosed in Board disclosures and Annual Reports.
* No direct SEBI approval is generally required for such transfers as it involves a private company.
---
### 3. **Effect on director’s shareholding**
* Once shares are transferred, the WTD/MD will become shareholders of the subsidiary company.
* They must disclose this holding as per the disclosure norms.
* This shareholding is considered **“interest” in the company** and may have implications under **related party transactions** provisions.
---
### 4. **Procedure for transfer**
* Obtain **Board approval** in both companies (parent and subsidiary) as per AoA.
* Execute **Share Transfer Deed (Form 7B)** signed by transferor (public company) and transferee (director).
* Pay **stamp duty** on share transfer deed.
* Submit the share transfer deed and other documents to the subsidiary company’s registrar.
* Register the transfer in the subsidiary’s **Register of Members**.
* Issue share certificates to the director in the subsidiary.
* Directors must file necessary **disclosures of interest** (e.g., Form MBP-1 or DIR-12) as applicable.
---
### 5. **Transfer to relatives of directors**
* The company can transfer shares to relatives of directors.
* The same rules apply, and disclosures must be made if relatives become related parties.
---
### Summary:
| Aspect | Details |
| ----------------------- | ---------------------------------------------------------------------------------------- |
| Transfer Allowed | Yes, public company can transfer subsidiary shares to its directors. |
| Company Law | Comply with Section 44, 56; Articles of Association |
| Stamp Duty | Pay applicable stamp duty on share transfer deed |
| Disclosure by Directors | Mandatory under Section 184 (Companies Act) |
| SEBI Regulations | Disclosure as per LODR; no specific approval required for transfer in private subsidiary |
| Procedure | Board approval → Share Transfer Deed → Stamp duty → Registrar update |
---
If you want, I can help you draft a checklist or template for the **share transfer deed** and **disclosure forms**. Would you like that?
---
### 1. **Is it allowed?**
Yes, a **public company can transfer shares of its subsidiary (private company) to its directors (WTD & MD)**. There is no general prohibition under the Companies Act on such transfers.
---
### 2. **Legal provisions to consider:**
* **Companies Act, 2013** (or 1956 if older law applies):
* **Section 44** and **Section 56** deal with transfer of shares.
* Articles of Association (AoA) of the private company must be complied with regarding share transfer.
* Stamp duty on share transfer deed needs to be paid as per the state laws.
* **Disclosure of Interest (Section 184 of Companies Act 2013):**
* Directors are required to disclose their shareholding interests in the company (including subsidiaries).
* If the shares are transferred to directors, they must disclose their interest (direct or indirect) in the company in the prescribed format at Board meetings or Annual General Meeting.
* **SEBI Regulations (if the public company is listed):**
* The public company must comply with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
* Since the shares being transferred are in the **subsidiary (private) company**, the key aspect is disclosure of interests in subsidiaries by directors.
* If directors of the public company hold shares in the subsidiary, it must be disclosed in Board disclosures and Annual Reports.
* No direct SEBI approval is generally required for such transfers as it involves a private company.
---
### 3. **Effect on director’s shareholding**
* Once shares are transferred, the WTD/MD will become shareholders of the subsidiary company.
* They must disclose this holding as per the disclosure norms.
* This shareholding is considered **“interest” in the company** and may have implications under **related party transactions** provisions.
---
### 4. **Procedure for transfer**
* Obtain **Board approval** in both companies (parent and subsidiary) as per AoA.
* Execute **Share Transfer Deed (Form 7B)** signed by transferor (public company) and transferee (director).
* Pay **stamp duty** on share transfer deed.
* Submit the share transfer deed and other documents to the subsidiary company’s registrar.
* Register the transfer in the subsidiary’s **Register of Members**.
* Issue share certificates to the director in the subsidiary.
* Directors must file necessary **disclosures of interest** (e.g., Form MBP-1 or DIR-12) as applicable.
---
### 5. **Transfer to relatives of directors**
* The company can transfer shares to relatives of directors.
* The same rules apply, and disclosures must be made if relatives become related parties.
---
### Summary:
| Aspect | Details |
| ----------------------- | ---------------------------------------------------------------------------------------- |
| Transfer Allowed | Yes, public company can transfer subsidiary shares to its directors. |
| Company Law | Comply with Section 44, 56; Articles of Association |
| Stamp Duty | Pay applicable stamp duty on share transfer deed |
| Disclosure by Directors | Mandatory under Section 184 (Companies Act) |
| SEBI Regulations | Disclosure as per LODR; no specific approval required for transfer in private subsidiary |
| Procedure | Board approval → Share Transfer Deed → Stamp duty → Registrar update |
---
If you want, I can help you draft a checklist or template for the **share transfer deed** and **disclosure forms**. Would you like that?
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