The company's shareholding determines an individual's ownership in a private limited corporation. The investment in the private limited company could be sold to attract new investors or to transfer control of the company.

Limitations on Share Transfers in AOA: A private limited company, like a Partnership firm, is a “closed organisation” of shareholders. As a result, the transfer of shares to a Private Limited Company may be restricted by the Articles of Association (AOA). Before beginning the action transfer process, the Company's Articles of Association must also be examined.

The right of shareholders to move their shares is usually restricted in one of two ways:

  • Right of first refusal :
    Investors who intend to sell any or all of their securities must sell them first to the individual registered private limited partnership members at a price agreed upon by the directors or auditors of their private limited partnerships The value of a share can be calculated using the formula/method specified in the Articles of Association. The company's shares can be freely transferred to an outside group if there are no present shareholders.
  • Denying powers of directors :
    The Manager may have the ability to refuse, under certain circumstances, the registration of a security transfer as allowed in the Articles of Association.

Initiation of the Share Transfer Procedure

The allocation of limited partnership ownership in a private limited partnership is a complicated process.

To begin the share transfer operation, you must take the following steps:

Step 1 : AOA revision: The articles of association of the Private Limited Company must be reviewed and limits considered.

Step 2 : The shareholder notifies the Company's Manager in writing of his or her intention to sell the company's stock.

Step 3 : Determine the price in accordance with the company's Articles of Association, which state that the company's shares must be sold first to its existing shareholders. (The Company Directors or the Company Auditor normally decide on this pricing.)

Step 4 : The corporation will then notify the other shareholders of the availability of shares and the final date of acquisition of the stock.

* If any present shareholders wish to purchase additional shares, they must be allotted these shares. Shares can be transferred to an external partner if no existing shareholders are interested or if there are extra shares to be transferred.

Step 5: Have the SH-4 Share transfer act signed by both the transferor and the transferee.

Step 6: The transfer certificate shall bear stamps in accordance with the Indian Stamp Act and the Stamp Duty Notice in effect in the State in question. Every 100 rupees of share value, or a portion thereof, is worth 25 paisas. Remember to invalidate any stamps that were issued at the time the transfer deed was executed or prior.

Step 7: A witness to the signatures of the transferor and the transferor of a share transfer deed is a person who supplies his or her signature, name, and address.

Step 8: Convert the share certificate or allocation letter into a share transfer deed and send it to the corporation. Within sixty ( 60 ) days of the date of execution, and in or on behalf of the client, a share transfer deed must be deposited with the firm, in or on behalf of the customer.

Step 9: After receiving the share transfer deed, the Board will consider it. If the share transfer documentation is complete, the Board may register the transfer by resolution.

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