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Changing shareholding pattern in a Private Limited Company

Nedge (Member) (24 Points)

02 February 2011

Hi,

I am new to this site and forum. Have been browsing this site regularly for the last couple of days and find it the most informative.

My query is:

How do I change the shareholding pattern in a Private Limited Company to reduce the stake of one of the directors from 25% to say 2%?

Currently there are 4 directors in the company each holding 25% each.

Thanks in advance.

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12 Replies

Jaideep (Service) (1368 Points)
Replied 02 February 2011

Just transfer the share to any other director.

Assumed that evrything is normal, as query doesnt sound otherwise.

Ronak (Trainee) (126 Points)
Replied 02 February 2011

Originally posted by : Jaideep
	Just transfer the share to any other director. Assumed that evrything is normal, as query doesnt sound otherwise.

HI,

However if he is not willing to trsf his shares than u may consider of fresh allotment of shares.

Rgds, Ronak

SAMAR JEET SINGH (CA) (72 Points)
Replied 02 February 2011

Hi,

1. Section 3(1)(iii)(a) of the co. act 1956 provides that private company by its article should restrict the right to transfer its shares.

2. Generally the article of the company provides detailed provisions for transfer of shares.

3 In your case you can take following steps:

step1: Director give notice in writing

Step2: Co. in turn will notify to its members price at which they can be taken by them which is determined by directors and within the time period they can be taken.

Step3: If no existing members take up than transfer to outsider.

4. Also refer section 111 power to refuse registration and apeal against refusal

Warm regards

(Guest)

Originally posted by : SAMAR JEET SINGH
	Hi, 1. Section 3(1)(iii)(a) of the co. act 1956 provides that private company by its article should restrict the right to transfer its shares. 2. Generally the article of the company provides detailed provisions for transfer of shares. 3 In your case you can take following steps: step1: Director give notice in writing Step2: Co. in turn will notify to its members price at which they can be taken by them which is determined by directors and within the time period they can be taken. Step3: If no existing members take up than transfer to outsider. 4. Also refer section 111 power to refuse registration and apeal against refusal Warm regards

ambani (B.Com) (23 Points)
Replied 29 May 2013

hi,

mine is a private ltd company. there are 2 directors including me. i have 60% share and my partner has 40% share. i want to increase my share. how to do it?

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 29 May 2013

Options:

1. Purchase some shares from your partner as per provisions of your Articles. OR

2. Company can allot additional new shares to you as per provisions of your Articles.

ambani (B.Com) (23 Points)
Replied 29 May 2013

Originally posted by : P C Agrawal

Options:

1. Purchase some shares from your partner as per provisions of your Articles. OR

2. Company can allot additional new shares to you as per provisions of your Articles.

Suppose 1000 shares are issued, is it mandatory to distribute among us (two directors) in the original proportion (i have 60%, he has 40%) so that the overall proportion does not change, but only the absolute numbers change

can i issue all the 1000 shares to only one director (majority shareholder of 60%) so that the original proportion is altered?

and

does the majority shareholder(60%) have the authority to issue shares on his own or should he take consent from the other shareholder? what if the other share holder does not agree?

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 29 May 2013

For issue of shares by a private company only approval of Board is required. Subject to provisions in the Articles, consent of shareholders is not required. Further, subject to the provisions in the Articles, all the new shares can be allotted to one shareholder also. It is not necessary to allot to existing shareholders in same ratio.

ambani (B.Com) (23 Points)
Replied 29 May 2013

Originally posted by : P C Agrawal

Approval of the board - means - more than 50% is enough or 100% is required?

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 29 May 2013

It requires simple majority (more than 50%).

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