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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.
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:
The one who intended to transfer his shares, he should give in writing his intention to transfer shares to the company.
The Company will notify to other member of the company regarding the availability of shares.
Company’s board of directors and auditors generally decides the price of the share.
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.
Company shall not register a transfer of securities of the company unless a proper instrument of transfer duly stamped dated and executed by or on behalf of the transferor and the transferee has been delivered to the company within a period of sixty days from the date of execution along with the certificate relating to the securities.
Nothing in section 56(1) shall prejudice any power of the company to register on the receipt of an intimation of transmission of any right to securities by operation of law from any person to whom such right has been transmitted.
Where an application is made by the transferor alone and relates to partly paid shares, the transfer shall not be registered, unless the company gives the notice of the application, in such manner as may be prescribed, to the transferee and the transferee gives no objection to the transfer within two weeks from the receipt of notice.
Every company shall, unless prohibited by any provision of law or any other of court, tribunal or other authority, deliver the certificates to the memorandum.
Within a period of two months from the date of incorporation, in case of subscribers to the memorandum.
Within a period of two months from the date of allotment, in the case of any allotment of any of its shares.
Within a period of one month from the date of receipt by the company of the instrument of transfer under subsection 1 or as the case may be of the intimation of transmission under subsection 2 in the case of transfer or transmission of securities.
The transferor should obtain the transferor deed in the prescribed format.
The transfer deed should be duly signed by the transferor and transferee.
Stamp the share transfer deed according to the Indian Stamp Act and Stamp duty notification.
The deed should be signed by the witness and also mentioned his/her name and address.
The share certificate and allotment letter should be enclosed with the transfer deed and deliver the same to the company.
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.