Transfer of shares in pvt ltd company

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rohit (Querist)
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20 December 2012 Hi

I would like to know the process of transfering shares of One Private Company by introducing new shareholders.

A company have two directors having Equal Capital of 50,000 Each. Now they want to add two more person in Company by transferring their 50% shares to them without any consideration.Its a pvt Ltd Company & not listed.
_- Is any Board Resolution to be passed
- Form 7 B has to be filled or not???
- Stamp duty to be paid or not.
- Attestation to be done or not??

Pls suggest

Ajay Mishra

Ajay Mishra (Expert)
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20 December 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.
(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)].

Ajay Mishra

Ajay Mishra (Expert)
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20 December 2012 TRANSFER OF SHARES

The Chairperson placed before the Board the Share Transfer Register alongwith duly executed transfer deed and other related documents for approval of the transfer of shares of the Company bearing Certificate no. 16 and 17. The matter was discussed and following resolution was passed unanimously:

“RESOLVED THAT the following transfer of shares as appearing in the Register of Transfer placed before the Board and initialed by the Chairperson for the purpose of identification be and is hereby approved.”

T.No. Date of Registration of Transfer No. of Equity Shares Name of the Transferor Ledger Folio No.
Transferor Name of the Transferee Ledger Folio No.
Transferee
4. 15.12.2009 6034 M/s…. Ltd 009 M/s (P) Limited 010
5. 15.12.2009 6850 M/s P. Ltd 009 Mr. 011

RESOLVED FURHTER THAT Ms. ……Director, Mr……., Director and Mr………, Authorised Signatory of the Company be and are hereby authorize to sign the share certificates issued to the members of the company.

RESOLVED FURTHER THAT the name of the above subscribers be entered into the Register of Members of the Company.”

Ajay Mishra

Ajay Mishra (Expert)
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20 December 2012 Compulsory requirement of transfer deed for effecting transfer
Section 108 provides that a company shall not register a transfer of shares of, the company, unless a proper transfer deed in Form 7B as given in the Companies (Central Government's) General Rules and Forms, 1956 duly stamped and executed by or on behalf of the transferor and by or on behalf of the
transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company, alongwith the certificate relating to the shares, or if no such certificate is in existence, alongwith the letter of allotment of the shares:

Ajay Mishra

Ajay Mishra (Expert)
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20 December 2012 Determination of valuation of shares for affixing stamps on the transfer deed
In case shares are not quoted, the value of the shares for the purpose of stamp means the price that the shares would fetch at the time of transfer or consideration agreed, whichever is higher. [Union of India v Kulu Valley Transport Ltd. (1958) 28 Comp Cas 29 (Punj)].
In case if the shares are listed on stock exchange, the valuation will be determined on the basis of the quotations available on the stock exchange on the date of execution of transfer deed or the consideration paid which ever is higher.
However, no transfer duty is applicable for transfer of shares in case of shares are in D-mat form.

Value of share transfer stamps to be affixed on the transfer deed

Stamp duty for transfer of shares is 25 paise for every Rs. 100 or part thereof of the value of shares as per Notification No. SO 130(E), dated 28-01-2004 issued by the Ministry of Finance, Department of Revenue, New Delhi.

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