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Company Share Transfer

Apart from the change in directors and address of the company, firm, or the entities another major procedure that takes place in the company is that of share transfer among the member of the company or the members to the outside of the company. This is a one of the major procedures because shares define the voting rights of the company and voting rights in turn define the members of the board of directors (BOD) of the company. Thus, in short, the shares determine the brain behind the working of a company, firm or the entity. The shares represent the power by which the leaders of the companies are elected to pave forward for them.

Shares are constituted as the part and parcel of the company. They represent the capital of the company raised through the equites in the market, there are variety of shares available in the market. And each one of them has its own importance. Now, here we are going to explain in brief about the share transfer in the company or the organization.

The transfer of a share can be called or said as the transaction that results in the change of company’s ownership as explained above also. The transfer of share is an important feature of a share in the Companies Act, 2013 and moreover, very few experts tend to know this but the transfer of shares helps to have perpetual succession of a business enterprise.

Yes! It is true after the death of the shareholder; the shares are thus transferred to the next kin whoever the will is addressed to. Thus, we see that with the death of the shareholder, the shares are not discontinued, if that were case than with death of each the shares would have been discontinued and the company would have also wound up. But that is not the case as we have seen above. Also, the shareholders can transfer the shares at their will, they can transfer the shares to the outsiders too by complying with the set of rules and regulations regarding the share transfer procedure listed down by the particular company.

The proprietorship of a company limited by share is held by the investors of the company. Proprietorship of a company rests with the shareholders and not the Directors. Allocation of proprietorship of a company can so be consummate by moving shares of the company from one person or unit to a different. Share transfer in a private limited company is typically more controlled when associated with a listed company that is publicly dealt. Therefore, most of the Articles of Association of a Private Limited Company limit the right of a stockholder to transfer the company's shares to an unknown. Therefore, it is significant to analysis the Articles of Association of the Company previous to affecting a share transfer.

Reasons of Share Transfer

  • Shareholders: - Shareholders are the legal owners of the company. They can also be NRI of Foreign Nationals or foreign entities.
  • Directors: - Directors of company are appointed by the shareholders of company to manage the affairs of the company.
  • Article of association: - It is company define the rights and responisbilities of shareholders and directors.
  • Authorised capital: - The authorised capital of a company determines the value and number of shareholders.
  • Paid up capital: - Paid up share capital of a company is the amount of money for which shares were issued to the shareholder for which payment was made by the shareholder.
  • The companies Act, 2013 defines private company in Section 2(68)
  • Private company means a company having a minimum paid up share capital of one lakh rupees or such higher paid up share capital as may be prescribed. This agreement allows following
  • Restricts the right to transfer its shares
  • Limits number of its members to two hundred. (Exception one person company)
  • Prohibits invitation to the public to subscribe for any securities of the company.

Shares Transfer Procedure:

Generally the procedure for of shares transfer in a private company is stated in company’s Article of Association. If any shareholder whether preference or equity wish to transfer his shares, then he can take the following steps:

Step 1

The one who intended to transfer his shares, he should give in writing his intention to transfer shares to the company.

Step 2

The Company will notify to other member of the company regarding the availability of shares.

Step 3

Company’s board of directors and auditors generally decides the price of the share.

Step 4

If no other member has come forward in order to purchase the available shares, then the person can transfer his shares to an outsider by issuing Form 7B.

Shares Transfer Rules:

Transferor and Transferee should follow

Step 1

The transferor should obtain the transferor deed in the prescribed format.

Step 2

The transfer deed should be duly signed by the transferor and transferee.

Step 3

Stamp the share transfer deed according to the Indian Stamp Act and Stamp duty notification.

Step 4

The deed should be signed by the witness and also mentioned his/her name and address.

Step 5

The share certificate and allotment letter should be enclosed with the transfer deed and deliver the same to the company.

Step 6

The Company will further process the documents and if it gets approved, the company will issue the new certificate in the name of the transferee.

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