Share Transfer procedures in a Pvt Ltd Company is a systematic way of transferring the ownership of shares from one owner to the other. Shares are the units of ownership in a company, and they can be bought, sold, or transferred. The shares in a private limited company are not traded publicly, it can only be sold or transferred to others. File ROC compliances for Pvt Ltd Company with Professional Utilities.

The transfer of shares in a private limited company in India is governed by the Companies Act, 2013, and the rules and regulations prescribed by the Ministry of Corporate Affairs (MCA). In this blog post, we will discuss the Share Transfer Procedures and the overall procedure for share transfer in a private limited company.

In a Private Limited Company, the transfer of shares is restricted to the company's Articles of Association (AOA). The AOA must be reviewed before any share transfer process begins.

Restrictions on Shareholders' Right to Transfer Shares

Rights of Pre-emption: If a shareholder wants to sell their shares, the shares must first be offered to other existing members of the company at a price determined by the Directors or the Auditor of the Company. The method for valuing shares is prescribed in the Articles of Association. If no existing shareholder is interested, the shares may be freely transferred to an outsider.
Powers of Directors to Refuse: As per the provisions mentioned in the Articles of Association, a director may refuse to transfer shares to another person. The director has the power to take decisions on share transfers in a Pvt Ltd Company.

Only the restrictions specified in the Articles of Association are legally binding, and any private agreements between shareholders are not binding on the company or the shareholders. The right to transfer shares cannot be completely prohibited or banned, as it is not permissible under the law.

Step 1: Acquire Share Transfer Deed

The process of share transfer takes off with the Share Transfer Deed, which is a legal document transferring ownership of shares from the transferor to the transferee. The Share Transfer Deed shall be executed between the parties and should be stamped and signed according to the Indian Stamp Act, 1899.

The Share Transfer Deed should contain the following information:

Company Name
Number and class of shares being transferred
Name, address and PAN of transferor and transferee
Consideration against the transfer of shares
Date of Execution

Step 2: Obtain No Objection Certificate (NOC)

The transferor shall obtain a No Objection Certificate from the company, which confirms that the company has no objection to the transfer of shares. The NOC should be obtained within two months of the execution of the Share Transfer Deed.

The transferor must apply in writing to the company by giving the original share certificate of the company, the Share Transfer Deed, along with the prescribed fee. The company, after verifying the documents, will issue the NOC if there are no objections.

Step 3: Submit Transfer Documents

The transferor should submit the Share Transfer Deed along with the original share certificate and NOC to the company within 60 days of the execution of the Share Transfer Deed. The firm will verify the documents against the transfer and update the records of the firm about the transfer of shares.

The company also needs to issue one new share certificate in the name of the transferee.

Step 4: Board Approval

The company's directors' board will consider the transfer request in view of the Articles of Association provisions and the relevant laws and regulations for approval or rejection.

The approved transfer is recorded in the minute books of the board and modified in the shareholders' register.

Step 5: Pay the Stamp Duty

The share transfer deed is liable for stamp duty at the prescribed rates in every state and shall be paid in advance prior to the presentation of the transfer documents before the company.

Step 6: Filing of Required Forms

The company needs to file the forms with RoC within 30 days of the transfer of shares. The forms required to be filed are Form SH-4 (for transfer of shares) and Form MGT-7 for filing annual returns.

Below are the documents required for share transfer in the case of a private limited company:

Share Transfer Deed: This is the main documentation needed for a share transfer process and has to be attested by both the transferor as well as the transferee.
Share Certificate: The original share certificate needs to be submitted along with the deed of share transfer by the transferor.
PAN Card: Copy of PAN Card of the transferee is required for the transfer of shares.
Board Resolution: The Board of Directors of the company needs to approve the transfer of shares and then issue a Board Resolution for the same.
No Objection Certificate (NOC): The company may demand an NOC from the transferor to the effect that there is no objection to the transfer of shares.
Indemnity Bond: The transferor may be asked to execute an indemnity bond guaranteeing the company against any losses which may result from the transfer of the shares.
Payment of Stamp Duty: Stamp duty should be paid on the transfer deed of shares at the prevailing rate in the concerned state.

It is always a good idea to consult a professional to make sure that all documents are taken care of properly and the share transfer procedure is completed smoothly as per the regulations. For share transfer process as well as company incorporation, you can get in touch with our team at Professional Utilities.

In conclusion, the share transfer process in a private limited company is a complex process that requires certain steps and compliance to be performed. In order to ensure compliance with the law and rules, as well as to avoid any kind of problem that may arise out of it, it is recommended that professional help and assistance be taken for the purpose of share transfer.

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Frequently Asked Questions

Can private limited shares be transferred?

Yes, the shares in a Pvt Ltd Company can be transferred, subject to the provisions mentioned in the Articles of Association.

What documents are required to transfer shares in a private company?

Documents required for share transfer in a Private Limited Company are:

Share Transfer Deed
Share Certificate
PAN Card
Board Resolution
NOC
Indemnity Bond
Stamp Duty

Who will pay stamp duty on share transfer?

The seller of shares is responsible to pay the stamp duty on share transfer.

How can I transfer shares in Pvt Ltd company?

The share transfer process involves making a transfer deed, board approval, submission of documents, payment of stamp duty fees.

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