Reduction of no. of shareholders of a part ix company

Respected Professional Colleagues,

Kindly give ur suggestions on the following case-

A partnership firm has been converted into a private Company under the provisions of Part IX of the Companies Act, 1956. Please note that the firm consisted of only 2 partners earlier but for the purpose of conversion the no. of partners were increased to 7 and so there are 7 shareholders in the Company. Now, the company just after its conversion wishes to reduce the no. of shareholders again to the previous no. i.e. 2.

Is it possible to do it by simply executing a transfer deed ?

Further, note that the one of the condition to be satisfied for availing exemption u/s 47(iii) of the Income Tax Act is -

The aggregate of the shareholding in the Company of the partners of the firm is not less than 50% of the total voting power of the Company and their shareholding continues to be as such for a period of 5 years from the date of succession.

Does the term - Partners of the Firm means all the 7 partners or any of the partners ?

Kindly reply at the earliest.

Thanks,

Akansha.

Originally posted by : akansha
	The aggregate of the shareholding in the Company of the partners of the firm is not less than 50% of the total voting power of the Company and their shareholding continues to be as such for a period of 5 years from the date of succession.

There is no restriction in Companies Act and it can be done merely by transferring the shares.

As per income tax act, Section 47 deals with transfer. In provision partners means any of the partners of the preceeding firm. This is to find whether they have right carry forward the business loss or unabsorbed depreciation of the precceding firm. So this company will satisfy this too.

Even if the above doesn't satisfy , they will not be able to claim or carry forward that particular loss there is nothing in companies act or income tax act to stop such transfer and it can be done.