How to Transfer shares in a Private Limited companies

Transferring shares in a Private Limited Company is a simple one, in a Private Limited company it is the responsibility of the shareholders to determine the ownership of the company and for this very reason  transferring of shares is important. And in this blog you will going to understand or answer to the question that how to transfer shares in a Private Limited Company–

 

Share transfer restrictions-

 

There are following restrictions which are involved in trasferring of the shares in a private Limited Company and those restrictions are mentioned under their Articles of association of the company. There are two kinds of share transfer restrictions that are described in AOA and those are as follows-

 

Power of Directors to refuse-  eventually, every decision regarding the future of the company lies with the Directors of the Company, and if there is certain circumstance in AOA which is not being followed then the Directors can refuse to transfer the shares.

 

Rights of Pre-emption-  if any shareholder wants to share its share either whole or part of its shares then before selling it to outside it is their duty to first ask existing members or shareholders.

 

If there is any private agreement between the shareholders regarding the transfer of the shares then they are not to be considered as legally binding upon them in any form.

 

Process of transferring shares are as follows-

 

1. Firstly one should see that or review the Articles of association for any sort of restriction associated with share transferee.
2. Secondly notice is to be given to the Board of Directors of the company for its intention.
3. Then price determination of shares is to be done. Evaluation of the price of shares is being done according to the clause mentioned in Articles of Association of the company.
4. Then shares must be firstly offered to the current members of the company.
5. The company should provide shareholders its share availability, the purchase date of shares and the price of the shares.

 

Selling of a Private Company shares

 

1. Firstly a proper transfer deed is to be prepared in a proper and prescribed format.
2. Then this deed is to be signed by the transferor and transferee of the shares.
3. Then this ded is to be stamped according to the Indian Stamp Act.
4. Then witness has to sign the deed who were present at the time of step 2.
5. Then share deed along with the share certificate have to be forwarded to the Board of Directors for approval.
6. And lastly if directors gives approval for the selling of the shares, then new share certificate is generated in the name of one in whose name the share is being transferred.