Share Transfer Services in Purnea, Bihar

Private Limited Companies are those types of companies in which the number of members range from two to two hundred. A private limited company has the limited liability of members, which extends to the share capital they hold in the company. According to the Companies Act of 2013, a private company cannot invite the public to subscribe to any securities of the company. Also, a private company enjoys a special right of restricting the transfer ability of shares, which enables them to maintain ownership. Section 2(58) (I) of the Companies Act, 2013 provides that the Articles of private company shall restrict the right to transfer the company’s shares. However, the restriction on transfer of shares in a private company is not applicable in certain cases such as, on the right of a member of the company to transfer his share to his legal representative & in event of death of a shareholder, the transfer of share to his legal heir cannot be restricted. It is also to be noted that the restriction cannot be made as prohibition but only by the Articles of Association (AoA or By-Laws) of the company.

The share capital in a private limited company is the amount of money invested by its owners in exchange for shares of ownership. Company directors are typically shareholders in their own companies. Shareholders exercise certain powers over how the company is run such as electing the board of directors.

• Check the articles of association for any restrictions
• Solve the restrictions, if any
• Shareholder to give in writing to the director that he wants to transfer his shares
• Determine the price of the shares to be sold (to be decided by the director)
• Company sends a notice to all shareholders proposing to buy the shares on sale
• If an existing shareholder does not buy the shares, an outsider can be approached to buy them.

The following steps are important to be followed to initiate the transfer of shares –

• The Articles of Association of the private limited company must be reviewed and restrictions contained in it must be addressed.
• The concerned shareholder must give a notice in writing intimating the directors regarding his/her intention to divest his shares from the company.
• If the directors agree to buy the shares of the shareholder willing to divest, the value of the shares will have to be determined either by the directors of the company or by the company’s auditors.
• The company would, in turn, come out with a notice intimating other shareholders regarding the divestment. The details include the quantum of shares available, the last date to purchase, price of the shares, etc.

In case the existing members of the company are not interested in buying the shares, the same can be allotted to outsiders. It is to be noted that, in both the cases (existing members and non-existing members),

A pre-emption right, or right of pre-emption, is a contractual right to acquire certain property newly coming into existence before it can be offered to any other person or entity. Also called a “first option to buy.” It comes from the Latin verb emo, emere, emi, emptum, to buy or purchase, plus the inseparable preposition pre, before. A right to acquire existing property in preference to any other person is usually referred to as a In practice, the most common form of pre-emption right is the right of existing shareholders to acquire new shares issued by a company in a rights issue, a usually but not always public offering. In this context, the pre-emptive right is also called subscription right or subscription privilege.

The Articles of a private company commonly vest the BoD with discretion regarding the acceptance of a transfer of shares. This power vested in the Board is fiduciary in nature i.e., it must be employed in good faith and for the benefit of the company and not for some inappropriate purpose. As per Section 58 of the 2013 Act, the BoD shall communicate the refusal within 30 days from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company and shall assign reasons for such refusal. This refusal can be appealed against to the National Company Law Tribunal (hereinafter referred to as “NCLT”) which shall pass such orders as it deems fit. Several judgements have been pronounced regarding the scope of the Company Law Board (the predecessor of the NCLT and hereinafter referred to as “CLB”) to hear appeals against refusal to register transfer under Section 111 of the Companies Act, 1956 (this Section corresponds to Section 58 under the 2013 Act).