Transfer of shares of pvt ltd co

This query is : Resolved

abc (Querist)
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14 January 2013 Please clear me on the following.

I have read that Shares of PVT LTD CO cannot be TRANSFERRED FREELY as AOA dont allow the same and RESTRICT IT...

FACTS OF THE CASE -

if there are 3 directors A, B & C

- DIRECTOR "A" (external party) wants to resign and give up his shareholding,

- AND B & C (both husband & wife) WANTS TO CONTINUE

- and also company gets "D, E, F, G, H, I, J, K, L, M, & N" i.e. 11 new shareholders all these 11 are RELATIVES OF CONTINUING DIRECTORS i.e the above couple B & C

THEN QUESTION IS -

(1) WILL IT BE POSSIBLE ONLY THROUGH BUY BACK ROUTE i.e. company buys back AND REISSUES?

OR

(2) CAN THE SHARES BE DIRECTLY TRANSFERRED WITHOUT BUYBACK?

PLEASE REPLY URGENTLY - THANKSS

CS Suraj Arora

CS Suraj Arora (Expert)
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29 January 2013 Dear abc

At the outset I would like to inform you that Shares can be directly transferred to new 11 proposed shareholder therefore there is no need to first Buy Back of those shares and then reissue the same.

Now I draw your attention towards the provisions of section 3(iii)(a) which restrict Transfer ability of shares. Basically the basic feature of a Private Limited Company is to restrict its members up to 50 therefore in order a responsibility is cast on the Directors to check that if the transfer is under 50 persons then they can allow Transfer but if the transfer is more than 50 person then they will not allow the same and shares can not be transferred.

In the nut shell Restriction in the relevant provisions of section 3(iii)(a) is for restriction for numbers. In your case the numbers are under 50 therefore you can transfer the shares directly unless there is specific restriction in the Articles of the Company like of Right refusal etc etc.

Thanks & With regards
Suraj Arora

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